Attention employers: tax changes for company cars

Given the significant changes to how the Australian Taxation Office (ATO) is now assessing travel in utes, Fringe Benefits Tax (FBT) may now be applicable where it previously wasn’t.

Company vehicle

FBT is a tax employers pay on certain benefits provided to their employees, in addition to their salary.

If you provide a panel van, single or dual cab ute to your employees for their work duties, the tax often applies. However, private use of these vehicles can be exempt where it is minor, infrequent and irregular.

While this exemption has previously required thorough record keeping and a high degree of professional judgement, employers can apply the newly released ATO guidance from 1 April 2018.

Under the new guidelines, private travel can be deemed to be minor, infrequent and irregular if:

  • less than 1,000 kilometres are travelled in the FBT year
  • a return journey does not exceed 200 kilometres.

In addition, any deviations made when travelling from home to work must be less than two kilometres.

What does it mean for employers?

Employers may need to implement an employee travel policy specifying that all private travel will adhere to the conditions above. Compliance with this policy should be confirmed by receiving an annual declaration from each employee, stating that they have complied with this policy. In addition, we recommend keeping a logbook for each vehicle.

This new guidance will not be applicable in all situations, including where the original purchase price of the vehicle exceeded the luxury car tax threshold. However, the minor, infrequent and irregular exemption may still be available for your employee’s private travel.

Each case will be determined based on the frequency and circumstances of the private use. We recommend keeping a detailed logbook for your eligible vehicles and recording details of each trip to justify where the exemption was claimed.

If you have any questions regarding how the minor, infrequent and irregular exemption may apply to your motor vehicles please contact Michael Trimble, Accountant at AFS on 03 5443 0344.