FBT Exempt vehicles
One of the most common fringe benefits provided to employees is the use of a company vehicle.
The Australian Tax Office (ATO) has recently released new guidelines for fringe benefits tax on exemptions to motor vehicles. Aspen Corporate recommends that small and medium business owners (SME) should reassess how their employees use car fringe benefits to avoid any compliance issues.
Fringe benefits tax (FBT) is a tax paid by employers at 47% on various cash and non-cash benefits provided to employees and associates as part of their employment. It's most commonly used for benefits such as company cars and portable electronic devices.
Small to medium enterprises can claim an FBT exemption for some benefits provided to employees. For example, an FBT exemption is normally claimed for work vehicles, provided
- the vehicle is not primarily used to carry passengers,
- can carry less than 1 tonne and
- private use by the employee is limited to travel between work and home; incidental work-related travel, or "minor, infrequent and irregular" private use.
Prior to the guidelines, the ATO had not defined what "minor, infrequent and irregular" use was however it has now provided tax agents and tax payers with clear direction on the treatment under PCG 2018/3
According to the guidelines Employees are allowed up to 2km for deviations on home to work trips and 1,000 km of private travel per year if no single return trip exceeds 200 km. The guidelines apply to the 2018/19 FBT year and beyond.
These guidelines mean businesses need to be careful about the cars they buy and the relevant employee use. If you are uncertain, we would recommend speaking to your Aspen Corporate Advisor before purchasing a vehicle for your business.
The ATO has also advised that businesses operating within the guidelines will not need to retain records that demonstrate the private use of each vehicle is minor and infrequent. In addition, the commissioner will not devote compliance resources to review your access to exemptions. Proving beneficial if you can remain within the guidelines.
If you have any questions in relation to your work motor vehicles or FBT please contact your Aspen Corporate advisor on 08 9228 0700 or firstname.lastname@example.org