The taxable value of a car fringe benefit is usually calculated under either the statutory formula or the operating cost method. However, certain car fringe benefits are exempt from fringe benefits tax (FBT).
What is FBT
The ATO Website states that a fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages. According to FBT legislation, a fringe benefit is a benefit provided in respect of employment regardless of whether the employee is a former, current or future employee.
The 2017 FBT year has just begun and what better time than now to review your FBT arrangements. You may find your current vehicle arrangements might be exempt if they fall into the below category.
A No Business Use Vehicle
Section 8(2) of the FBT Act details how certain car fringe benefits are exempt from FBT even where there is no business use of the vehicle, particularly when both of the following conditions apply:
(a) The car is:
(i) A taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or
(ii) Any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and
(b) There was no private use of the car during the year of tax and at a time when the benefit was provided other than:
(i) Work-related travel of the employee; and
(ii) Other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.
The applicable law is largely dependent on the type of car and its actual use. Where the private use of the car is limited to “work-related travel”, which includes travel between the employee’s home and work location, and other private use which is considered minor, infrequent and irregular, the provision of the car will be exempt from FBT.
If an employer provided a panel van, ute or similar vehicle with a carrying capacity of less than one tonne, assuming it has no business use other than travel from work to home and other minor infrequent and irregular use, there will be no FBT payable.
Duel cab vehicles have additional criteria to meet for FBT exemption under miscellaneous tax ruling MT 2024 and only qualify if either:
(a) They are designed to carry a load of one tonne or more, or more than eight passengers
(b) While having a capacity of less than one tonne, they are not designed for the principle purpose of carrying passengers.
If you would like to discuss your FBT arrangements please contact our office.