RSM Australia

Fringe Benefits Tax – When is private vehicle use exempt?

ATO releases draft guidelines to assist employers determining Fringe Benefits Tax (FBT) exemptions for employee’s private use of vehicles. 

The draft Practical Compliance Guideline (PCG) considers FBT exemptions often used by employers in respect of utilities, vans and eligible dual cabs.

Whilst PCG 2017/D14 is in draft form and is open to public consultation, it provides an insight into what the Commissioner of Taxation (Commissioner) considers minor, infrequent or irregular private use for the purpose of car-related FBT exemptions.

If the Draft Guideline is finalised in its current format, an eligible employer who relies on the Draft will not be required to keep records that demonstrate that an employee’s private use of a vehicle is minor, infrequent and irregular and the ATO will not devote compliance resources to review the employer’s access to the car related FBT exemptions for that employee.

An employer will be able to rely on the Draft Guideline where the following conditions are met:Fringe Benefits Tax - Exempt Car and residual benefits

Conditions relating to the provision of vehicle

  • The employer provides an “eligible”  vehicle (e.g. van, utility truck or dual cab ute) to a current employee in order for the employee to perform their work duties;
  • The employer has taken all reasonable steps to limit private use of the vehicle and have measures in place to monitor such use;
  • The vehicle does not have any non- business accessories (non-business safety accessories such as a child safety seat will not cause the vehicle to fall outside of the PCG) ;
  • The vehicle had a GST inclusive value less than the luxury car tax threshold at the time the vehicle was acquired; and
  • 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.

Conditions relating to private use of vehicle

  • Where the employee uses the vehicle to travel between home and work 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 is taken for a wholly private purpose; and
  • No single return journey for a wholly private purpose exceeds 200km.

The PCG does not provide any practical guidance on how employers can monitor employee private use to ensure it falls within the conditions described above.

Employers may wish to review current policies and data collection procedures to ensure the private use of vehicles treated as FBT exempt, fall within the conditions detailed above or they may find themselves subject to ATO compliance activity.

When finalised, the Guideline will apply to car and residual benefits provided in the 2018 FBT year and later years. 

If you require further advice on FBT or the tax implications of benefits you are providing to employees, please contact your local RSM office.