FBT Exemption for minor and infrequent use of eligible vehicles

A fringe benefit generally arises where an employer makes a vehicle they hold available for the private use of its employee. However, the Fringe Benefits Tax Assessment Act 1986 (Cth) exempts the provision of certain ‘eligible vehicles‘  where the private use of these vehicles by employees during a fringe benefits tax (FBT) year is limited to work-related travel, and other private use that is ‘minor, infrequent and irregular’.

Last year the Australian Taxation Office (ATO) published a draft ‘Practical Compliance Guideline (PCG 2017/D14)
Exempt car and residual benefits: compliance approach to determining private use of vehicles’ which set out their view of what constitutes ”minor, infrequent and irregular’.  A copy can be viewed or downloaded from the ATO website here.  This draft Guideline provides that the exemption will apply if:

  • you provide an eligible vehicle to a current employee
  • the vehicle is provided to the employee to perform their work duties
  • you take all reasonable steps to limit private use of the vehicle and have measures in place to monitor such use
  • the vehicle has no non-business accessories
  • the vehicle had a GST-inclusive value less than the luxury car tax threshold at the time the vehicle was 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, and
  • your employee uses the vehicle to travel
    • between their home and their place of work and any diversion adds no more than two kilometres to the ordinary length of that trip
    • no more than 750 kilometres in total for each FBT year for multiple journeys taken for a wholly private purpose, and
    • no single, return journey for a wholly private purpose exceeds 200 kilometres.

Earlier this month the ATO released a final version ‘Practical Compliance Guideline (PCG 2018/3) Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles‘ of this document as the authorative ATO view.  A copy can be viewed or downloaded from the ATO website here. This final Guideline provides that the exemption will apply if:

  • you provide an eligible vehicle to a current employee
  • the vehicle is provided to the employee for business use to perform their work duties
  • the vehicle had a GST-inclusive value less than the luxury car tax threshold at the time the vehicle was 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
  • you have a policy in place that limits private use of the vehicle and obtain assurance from your employee that their use is limited to use as outlined in the Guidelines
  • your employee uses the vehicle to travel between their home and their place of work and any diversion adds no more than two kilometres to the ordinary length of that trip, and
  • for journeys undertaken for a wholly private purpose (other than travel between home and place of work), the employee does not use the vehicle to travel
    • more than 1,000 kilometres in total, and
    • a return journey that exceeds 200 kilometres.

The ATO has indicated that the draft guideline will be the approach they apply for the 2018 FBT year, commencing 1 April 2018, with the final version applying from the 2019 FBT year and beyond, 1 April 2019 and later years.

While merely the ATO view of the law and not necessarily the law itself obviously it would be prudent for schools providing eligible vehicles, such as school utes, to comply with these guidelines.

 

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