Topical Update | FBT and Incidental Private Usage - January 2018
If my annual trip north along the Pacific Highway over Christmas was anything to go by, the dual cab ute is definitely the transport chariot of choice, especially when this annual migration also requires the towing of a boat, caravan, kitchen sink, etc.
The ATO released PCG 2017/D14 on 18 December 2017 (well timed?), and whilst draft provides useful insight as to what the Commissioner considers 'minor, infrequent or irregular' private use for the purpose of car-related FBT exemptions.
As most of our learned clients would know - incidental private usage of eligible vehicles (utes, vans etc) is an exempt benefit for Fringe Benefits Tax purposes but ONLY where the private use of eligible vehicles by current employees during an FBT year is limited to work-related travel, and other private use that is 'minor, infrequent and irregular'.
The ATO has recognised varying forms of record keeping are currently being used by employers to record eligibility for these car related exemptions.
This draft guideline provides some clarity around when the ATO will not seek further verification or documentation on private usage and the application of FBT. The key provisos are:
a) You provide an eligible vehicle (ute, van etc) to a current employee;
b) the vehicle is provided to the employee to perform their work duties;
c) you take all reasonable steps to limit private use of the vehicle and have measures in place to monitor such use;
d) the vehicle has no non-business accessories;
e) the vehicle had a GST-inclusive value less than the LCT threshold at acquisition;
f) 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;
g) you employee uses the vehicle to travel:
i. between their home and their place of work and any diversion adds no more than two kilometres to the ordinary length of that trip;
ii. no more than 750 kilometres in total for each FBT year for multiple journeys taken for a wholly private purpose, and
iii. no single, return journey for a wholly private purpose exceeds 200 kilometres.
Whilst the draft guidance does not provide any indication on how employers could/should monitor private usage, as most employers will require a declaration for substantiation purposes from their employees for exempt benefits, we suggest the guideline above be incorporated into this substantiation document as best practice as we approach the end of the 2018 FBT Year.
The draft guidance, if finalised in its current format will apply from the 2018 FBT Year.
The full draft guidance can be found at: https://www.ato.gov.au/law/view/document?DocID=COG/PCG201714/NAT/ATO/00001