It is a commonly held belief that if an employer provides a ‘Ute’ or similar commercial vehicle to an employee, that it is 100% tax deductible and will not attract Fringe Benefits Tax (FBT).
However most people are not aware that in this situation the ATO has always required that the employee’s private usage must be ‘minor and infrequent’ and the vehicle must be an ‘eligible vehicle’ for that exemption to apply.
In an attempt to clarify the rules around FBT exempt motor vehicles, the ATO has released new guidelines that provide ‘safe harbour’ to those employers that work within the ATO’s guidelines.
In a nutshell:
Eligible vehicles include either:
- A road vehicle designed to carry a load of at least 1 tonne (other than a vehicle designed for the principle purpose of carrying passengers) or more than eight passengers; or
- The vehicle has a designated load capacity of less than 1 tonne but is not designed for the principle purposes of carrying passengers
To meet the ATO’s safe harbour relief the conditions below must be met:
- The Employer provides an ‘eligible’ vehicle to a current employee;
- The vehicle is provided to the employee for business use to perform their work duties;
- The employer has a policy in place that limits private use of the vehicle and obtains assurance from the employee that their use is limited to that
- The GST inclusive value of the motor vehicle is less than the luxury car tax threshold when acquired;
- The vehicle is not provided as part of a salary packaging arrangement and the employee cannot elect to receive additional remuneration in lieu of the
use of the vehicle;
- Employees must provide written assurance each year that private use of the motor vehicle provided is limited to travel:
a. Between their home and their place of work and any diversion adds no more than two kilometers to the ordinary length of that trip;
b. No more than 1,000 kilometers in total for each FBT year for multiple journeys taken for a wholly private purpose; and
c. No single, return journey for a wholly private purpose exceeds 200 kilometers.
If you are an employer and would like some assistance to reduce you potential FBT exposure in this area, please us on (08) 93355211 to make an appointment.
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Author: Heather Cox