FBT and depreciation limits on vehicles other than cars

As we farewell another Fringe Benefits Tax (FBT) year we often hear questions around private use of vehicles and whether larger ‘utes’ are exempt from FBT, such as Chevrolet Silverados, Dodge Rams, Ford F150s and the like.

Despite not being classified as a ‘car’, FBT can still arise from any private use of these vehicles.

What is defined as a ‘car’

A car is defined under the Income Tax Act 1997 as a vehicle designed to carry a load of less than one tonne and fewer than nine passengers.

For this reason, Chevrolet Silverados, Dodge Rams, Ford F150s and the like which have a carrying capacity over one tonne and are not primarily designed to carry passengers are not classified as cars. They are classified as commercial vehicles.

Will the car cost limit for depreciation apply?

As these vehicles are not defined as a car, they are not subject to the car cost limit for depreciation. This means the entire cost of the vehicle can be depreciated.

When does Fringe Benefits Tax apply?

Despite not being classified as a car for fringe benefit purposes, any private use on such vehicles can still attract FBT due to a benefit being provided.

As it’s not seen as a ‘car benefit’, the private kilometres are subject to the cents per kilometre method. However, when a logbook is maintained the operating cost method (despite not being a car benefit) may also be used.

The private travel can be exempt if this use is ‘minor, infrequent and irregular’. This applies when:

  • employees travel a maximum of 1,000kms for private purposes in the vehicle
  • no single return journey is longer than 200kms
  • where the vehicle is used to travel between home and work, any diversion can only add no more than 2kms to the ordinary trip length.

Therefore, we strongly recommend a logbook is kept for these vehicles to ensure the correct treatment, regardless of if it shows 100% business use.

 

Samantha Oliver

If you have any questions about your vehicle/s or are thinking about purchasing one but are unsure of the tax implications please call AFS Accountant Samantha Oliver on 03 5443 0344.

 

 

 

 

Photo source: www.chevrolet.com/trucks/silverado-1500-pickup-truck