New ATO view on providing Utes, Trucks and Vans to employees.
As part of many businesses’ operations, commercial type vehicles such as work Utes, Vans and Trucks are provided to employees to complete their duties. If your business provides this, it is likely your employee may use the vehicle for some private use, such as visiting the shops, or running the occasional errand on the weekend.
This private use has typically been categorised by many businesses as ‘minor, infrequent and irregular’ private travel, and would not attract any tax consequences when it came to reviewing the businesses’ Fringe Benefits each year.
Historically ‘minor, infrequent and irregular’ travel had not been defined, and most taxpayers were unclear as to what amount of private travel would tip them over this ‘minor, infrequent and irregular’ threshold and expose them to Fringe Benefits Tax on the vehicle.
To address this uncertainty, the ATO have released draft guidelines in PCG 2017/D14 outlining their position on a ‘safeharbour’ amount of ‘minor, infrequent and irregular’ private usage. That is, what amount of private travel does the ATO consider to be complying with the minor, infrequent and irregular’ exemption.
Further if a taxpayer complies with these ‘safeharbour’ guidelines, the ATO will not devote resources to reviewing the exemption, and the taxpayer will not need to keep records of the private usage.
The ATO’s ‘safeharbour’ conditions for private use of a commercial vehicle are summarised below:
- The vehicle is provided to the employee to perform their work related duties;
- You (the employer) have taken all reasonable steps to limit the private use of the vehicle, and have measures to monitor such use;
- The vehicle has no non-business accessories fitted;
- The employee uses the vehicle to travel:
- Between home and work, and any diversion does not add more than 2 kms to the ordinary length of that trip;
- No more than 750kms in total for each FBT year for private journeys;
- No single return journey for private purposes exceeds 200kms.
It is important to note that this is the ATO’s view, and as such if the private use of the vehicle exceeds any of the above travel thresholds, it does not mean the vehicle is no longer an exempt benefit. Ultimately it will depend on the circumstances of each commercial vehicle provided.
In conclusion, if you are an employer providing commercial motor vehicles to employees, you will still need to monitor the private usage of each vehicle to ensure the private usage is ‘minor, infrequent and irregular’. If you are uncertain of the private use of vehicles provided to employees, maintain a logbook of the trips taken to demonstrate private usage does not exceed the ‘safeharbour’ amounts above.
If you have any questions regarding to this information or FBT and your business please call our office and we will be happy to help.