Perth Accountants, Brealey Quill Kenny outline below the new FBT and Commercial Vehicles Guidelines.
An increase in the provision of dual cab utes has resulted in the ATO issuing new guidelines in relation to the private use of “commercial vehicles”, the result of which will put more of an onus on employers to monitor private use of company provided vehicles, or risk an increase in Fringe Benefits Tax (FBT).
By way of background the ATO has traditionally taken the view that FBT would not be applicable on commercial vehicles provided that the private use was “minor, infrequent or irregular”. This included travel home to work, but not to sporting events, grocery shopping, holidays, lengthy detours etc.
The ATO has identified that monitoring the after-hours usage is not practical, so is proposing that the FBT exemption will apply if:
- Any diversion to and from work is no more than 2km in total,
- Total of private use travel does not exceed 750kms for the FBT year, and
- No single private trip is more than 200km.
The difficulty for employers is identifying a “minor diversion”, as a diversion not considered minor will change the nature of the entire trip, increasing the chances of exceeding the annual limit. For example a diversion of over 2km, on the way to or from work to pick up a child from school, or attend football training, will make the entire trip private in nature.
In order to satisfy the ATO requirements in relation to commercial vehicles, employers will need to implement systems to ensure they:
- Take all reasonable steps to limit private use of the vehicle,
- Have measures in place to monitor any private use of the vehicle, and
- Not have any non-business accessories fitted.
This guideline is a timely reminder to review your fleet and your FBT obligations:
- Do you have any business owned vehicles taken home overnight by employees?
- Is there an exemption from FBT available for those vehicles?
- Are your policies and procedures adequate to ensure your employees are complying with the new guidelines?
- If you are unable to access an exemption, do you have a valid log book to reduce your FBT liability?
Please contact our Canning Vale, Perth Accounting office to discuss your particular circumstances.