It’s useful to recap on some of the more common areas where FBT liabilities can arise. There are the perennial issues around entertainment, travel diaries and log books for cars, however, this year’s main benefit issue revolved around the changes to FBT impacting on Utes.
A fringe benefit is an exempt benefit where the private use of eligible vehicles by current employees during a FBT year is limited to work-related travel, and other private use that is ‘minor, infrequent and irregular’.
Historically, industry took a wide view on the interpretation of the above exemption, however, the Australian Taxation Office (“ATO”) has clarified their position in respect of a panel van, ute, or other commercial vehicle (that is, one not designed principally to carry passengers). As such, guidance provided by the ATO that must be met for the benefit of that vehicle’s private use to be FBT exempt (from 1 April 2018) are as follows:
- Travel between the employee’s place of residence and place of employment and any diversion adds no more than two kilometres to the ordinary length of that trip;
- Travel that is incidental to travel in the course of performing duties of employment: and/or
- Journeys undertaken for wholly private purposes (other than travel between home and place of work), are:
- not more than 1,000 kilometres in total for the year; and
- a return journey does not exceed 200 kilometres.
The practical impact of the above is that the flexibility previously available has been significantly reduced and the potential exposure to FBT heightened. In addition, the eligible and ineligible vehicles list previously provided by the ATO has been removed (the ATO now require you to assess whether the vehicles meet the private use exemption criteria).
If you provide utes to your employees, we recommend that you ensure your company policy is updated to limit the private use of these vehicles in line with the practical compliance guidelines. As part of ensuring appropriate documentation is maintained, employees should sign an annual declaration stating that their usage is minor and infrequent and doesn’t exceed the limits mentioned above.
If the ute does not meet the above conditions and is therefore not an exempt benefit, you will need to consider whether each ute provided is designed to carry a load of more than, or less than one tonne as this impacts how the resultant fringe benefit is calculated.
A ute designed to carry a load of less than one tonne would be a car fringe benefit and the logbook or statutory method would be used to calculate the FBT liability.
A ute designed to carry a load of more than one tonne would be a residual fringe benefit and would be calculated by multiplying the private kilometres travelled during the year (a soundly based estimate) by the cents per kilometre rate which is as follows:
|FBT year ending||0–2500cc||Over 2500cc||Motor cycles|
|31 March 2020||55c||66c||16c|
|31 March 2019||54c||65c||16c|
Finally, should you have any further questions regarding the FBT practical compliance guidelines and your business, please contact your ESV engagement partner on 02 9283 1666.