Utes and FBT Fringe Benefit Tax

Utes and the Fringe Benefits Tax

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Fringe benefits tax (FBT) is a tax paid by employers on certain benefits provided to their employees, or to their employees’ family or other associates.

FBT is separate to income tax. It’s calculated on the taxable value of the fringe benefit.

Examples of fringe benefits include:

  • allowing an employee to use a work car for private purposes
  • car parking
  • paying an employees gym membership
  • giving an employee a discounted loan
  • giving benefits under a salary sacrifice arrangement with an employee.

In the case of a ‘work’ ute it’s important to make sure that employers are familiar with the ATO’s position on exempt car benefits and FBT.

It’s important to understand what constitutes exempt use of eligible vehicles. There is not FBT when an employee uses your vehicle if:

It’s an eligible vehicle and private use of the vehicle is limited.

The following vehicles are eligible for the limited private use exemption:

  • a single cab ute
  • a dual cab ute or a 4-wheel drive vehicle that is designed to either (carry a load of 1 tonne or more, carry more than 8 passengers or carry a load of less than 1 tonne but is not designed for the principle purpose of carrying passengers.
  • a panel van or goods van
  • a modified vehicle (such as a hearse)
  • a taxi

Uses Eligible for the Exemption

FBT does not apply if your employee only uses your eligible vehicle for the following:

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

If FBT does not apply to your employee’s use of your eligible vehicle, then it also does not apply to:

  • any road or bridge tolls you incur while your employee is using the vehicle
  • use of the vehicle by your employee’s associate (such as their partner), provided their use is also minor, infrequent and irregular.

Keeping Log Books

There is a general requirement that you must keep records that are adequate to enable your FBT liability to be assessed.  You must keep an logbook (recorded in English) for at least 12 continuous weeks during the income year. That 12-week period needs to be representative of your travel throughout the year. Each logbook you keep is valid for five years, but you may start a new logbook at any time.

The logbook needs to include:

  • the dates on which the journey began and ended
  • the odometer readings at the start and end of each journey
  • the kilometres travelled
  • the purpose of the journey.

There is talk the ATO is starting to crack down on vehicles with potential FBT, so it’s more important than ever to keep accurate records to that represent the usage type of the work vehicles.

If your employee is planning on taking the work ute away for a family holiday over the break, it might be worth considering what fringe benefit or residual fringe benefit you might be subject to as the use is no longer limited to personal use and will start to attract FBT.

More info can be found at the ATO website about Fringe Benefit Tax on eligible vehicles.

If you have any questions about Fringe Benefit Tax please don’t hesitate to get in touch with our Team at STS Accounting.