ATO Cracks Down on Private Usage of Work Vehicles

Clients will need to be more careful with private usage of work vehicles after ATO announces revised guidance on fringe benefits tax (FBT).
What has changed?
The revised guidance includes a change in the published interpretation of the way existing rules operate in relation to the private use of work vehicles. Work vehicles include single and dual cab utes not designed for the principal purpose of carrying passengers. Four-wheel drives are also included if they are designed to carry a load of one tonne or more, designed to carry more than 8 passengers or not designed for the principal purpose of carrying passengers.
The revised guidelines:
  • Provide clarity around what the tax office expects employers to do in demonstrating ‘minor, infrequent and irregular’ use of work vehicles;
  • Suggest that a vehicle’s private use cannot exceed 1000km in a year, and no private return journey can exceed 200km;
  • Suggest that while home to work travel is generally not considered private for these vehicles, according to the revisions, any trip in which a home to work route varies by more than 2km will be considered a personal trip.
What do employers need to know?
  • The ATO is putting the onus very much on the employer to prove that work cars are not used as a perk to retain and attract staff;
  • The cost of non-compliance is high as failure to comply with the new guidelines may see a 20 per cent FBT impost on the full cost of the vehicle;
  • The ATO’s methods of tracking such activity are becoming increasingly sophisticated;
  • All employers should have a policy on work-related vehicles and must make sure they can monitor how it is enforced.

Employers are reminded to ‘watch this space’ and seek advice as is appropriate to the business.

Useful Links
Practical Compliance Guideline: Exempt car benefits and exempt residual benefits - the compliance approach to determining the private use of vehicles can be accessed here.
A list of FBT exempt motor vehicles can be accessed here.
If you have any concerns or require any assistance please contact us.