There are Fringe Benefits Tax exemptions available for vehicles not principally designed to carry passengers. There are specific formulas to determine whether vehicles are classified as exempt vehicles, however they generally include utes and vans. Included in this list is some dual-cab utes. Due to the general improvement of dual-cab utes, including the size and amenity of the vehicles, many business owners are purchasing these vehicles for use as a family vehicle to go to the beach, tow caravans and other private purposes as a way to “avoid” fringe benefits tax.
The ATO’s guidelines allow “minor, infrequent and irregular” private use. This includes travelling to and from work. It does not however extend to trips to the beach, the supermarket, on holidays, amongst other things. With many dual-cab utes costing more than $50,000 this could end up being a nasty surprise if you don’t hold a log book and are found to have breached the exempt vehicle guidelines. As an example, a $50,000 vehicle used for private use without a log book may incur an annual FBT liability in the vicinity of $10,000.
The ATO has realised that monitoring the usage of these vehicles after hours in not realistic. The ATO is considering new rules that will allow up to 750 kms of private travel in company cars each year as long as no single return journey exceeds 200kms. Employees can make small diversions between home and work, as long as the detour adds less than two kms to their total trip. Whilst this might be a relaxing of rules surrounding private use of vehicles, the intention is to implement much stricter monitoring conditions.
Employers who use commercial vehicles in their business, should be aware of the ATO’s attention to the usage of such vehicles and the potential new rules.