FBT and exempt vehicles

Forget salary packaging a car… may tradies just don’t need to worry about FBT at all due to the type of car they drive.

Exempt Vehicles Rules

To be exempt from FBT, all of the following conditions are satisfied:

  • the vehicle is a panel van, utility (ute) or other commercial vehicle (that is, one not designed principally to carry passengers)
  • the employee’s private use of such a vehicle is limited to
    • travel between home and work
    • travel that is incidental to travel in the course of duties of employment
    • non-work related use that is minor, infrequent and irregular (eg: occasional use of the vehicle to remove domestic rubbish).

The exemption will also apply to the private use of a taxi if the taxi is owned or leased (eg: not let on hire), if the employee’s private use is limited to:

  • travel between home and work
  • travel that is incidental to travel in the course of duties of employment
  • non-work related use that is minor, infrequent and irregular (eg: occasional use of the vehicle to remove domestic rubbish).

What Vehicles are covered…

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How the Commissioner will apply this law…

In Practical Compliance Guideline PCG 2017/D14, titled “Exempt car and residual benefits: compliance approach to determining private use of vehicles” the Commissioner states that if this Guideline applies:

you do not need to keep records about your employee’s use of the vehicle that demonstrate that the private use of the vehicle is ‘minor, infrequent and irregular and… the Commissioner will not devote compliance resources to review that you can access the car-related exemptions for that employee.

Establishing minor infrequent and irregular use is the hardest part, so what types of cars and arrangements does this Guideline apply to?

5. You may choose to rely on this draft Guideline if:

(a) you provide an eligible vehicle 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 luxury car tax threshold at the time the vehicle was acquired

(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) your 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.

No non business accessories, like fishing rod holders or bike racks. No salary packaging or extra cash arrangements. No more than 2km on the way to work or home (going to footy training is an example and thesis guidelines will not apply if the employee does this each week). No more than 200km private travel in one trip and no more than 750kms in a year… If so, then no FBT

 

 

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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