Fringe benefits tax (FBT) is tax employers pay on certain benefits they provide to their employees – including their employees’ family or other associates.
The benefit may be in addition to, or part of, their salary package.
Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of its employee.
The private use of a motor vehicle is exempt from Fringe Benefit Tax (FBT) if all of the following conditions are satisfied:
- the vehicle is a panel van, utility (ute) or other commercial vehicle (that is, one not designed principally to carry passengers)
- the employee’s private use of such a vehicle is limited to
- travel between home and work
- travel that is incidental to travel in the course of duties of employment
- Non-work related use that is minor, infrequent and irregular
ATO practical guideline
The ATO has recently released a draft practical guideline on the private use of eligible motor vehicles by employees. Where private use of these vehicles by your employees is limited, some Fringe Benefits Tax car-related exemptions may apply.
The guideline explains when the Commissioner will not apply compliance resources to determine if the private travel was limited to travel:
- between employees’ home and workplace; and
- that is minor, infrequent and irregular
for the purposes of the car-related FBT exemptions.
You may choose to rely on this Guideline if:
a. you provide an eligible vehicle to a current employee
b. the vehicle is provided to the employee for business use to perform their work duties
c. the vehicle had a GST-inclusive value less than the luxury car tax threshold at the time the vehicle was acquired
d. 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
e. 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 subparagraphs (f) and (g) of this paragraph
f. 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
g. 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
You will need to check that you continue to meet the above requirements of the Guideline in each year you provide the car benefit if you wish to rely on this Guideline.