Changes to FBT on Utes
05 July 2018
For a long time, businesses using utilities were exempt from Fringe Benefits Tax (FBT) so long as they were used predominantly for business use and personal use was ‘minor, infrequent and irregular’.
Now the ATO has released draft guidelines that outline that these vehicles will no longer be exempt and employers will need to have their drivers keep logbooks to ensure private usage stays within new capped limits. This means that employers could face new FBT and compliance expenses.
The guidelines outlined that the old FBT rules were unrealistic as no one was really policing the private usage of these vehicles: “Feedback and experience has shown inconsistency as to methods used by employers to ensure compliance with the car-related exemptions leading to additional compliance costs especially when the private travel is relatively low”.
“To reduce these compliance costs and provide certainty, this draft guideline explains when the Commissioner will not apply compliance resources to determine if private use of the vehicle was limited for the purposes of the car-related exemptions.”
Under the new guidelines, employees must not deviate from their usual route to and from work by more than 2km. The draft uses the example of travelling to sports practice after work in excess of 2km as unacceptable, as sports practice would comprise the primary destination and not a diversion from one’s usual route from work to home.
These new guidelines are expected to be retrospective, which means all travel from 1 April 2017 (start of the FBT year) will be factored in. This means that businesses need to be mindful that employees limit their personal use of work vehicles to the 2km allowance effective immediately, or the company could be liable for FBT. The guidelines also allow for an extra 750km a year of non-work travel, capped at 200km in any single return trip but this needs to be supported by logbook.
Overall, these changes will provide more freedom for private use than was previously in place as they allow for minor deviations from the route home to pick the kids up and do drop offs, however it will apply much more stringent reporting and compliance requirements to one of the highest selling segments in Australia.
StreetFleet has a few great solutions to help businesses deal with these new issues, and this includes an electronic logbook to help produce easy and ATO compliant FBT reports annually (as well as a few other great features).
Some businesses are now offering car allowances to staff and dealing with the FBT through a tax effective method of leasing such as a novated lease.
Either way, StreetFleet has the solution to help your business move forward.