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Benefit for employers in new guidance on work vehicles

Benefit for employers in new guidance on work vehicles

Hayley Lock and James Trainor discuss the ATO's latest guidance on work vehicles and FBT.


Partner, People Services

KPMG Australia


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On 11 July the Australian Taxation Office (ATO) released Practical Compliance Guide PCG 2018/3 (the PCG). The PCG sets out circumstances in which the ATO will generally accept that certain vehicles used privately by employees may be exempt from fringe benefits tax (FBT). The PCG applies from the year of tax commencing 1 April 2018.

Certain vehicles such as utility trucks and vans may be exempt from FBT where their private use (excluding home to work travel) is minor, infrequent and irregular. Until now, employers have largely had to judge for themselves where the limits of “minor, infrequent and irregular” lie.

The ATO states that it will generally accept that the exemption criteria are satisfied where all of the following apply:

  • The employer has a strict policy of limiting wholly private trips (which do not include travel between home and work unless they involve a detour of more than 2 kilometres).
  • The vehicle’s base value for FBT purposes is below the luxury car threshold.
  • The vehicle is not provided under a salary packaging arrangement, or other arrangement where the employee’s salary would be higher but for the provision of the vehicle.
  • The aggregate distance travelled on wholly private trips in the year of tax is less than 1,000 kilometres, and no one return trip exceeds 200 kilometres.

Importantly, the PCG indicates that a written statement (including email) from the employee that he or she has complied with the last of these conditions would be sufficient for the employer to rely on.

Employers who choose not to apply these guidelines may still be eligible for the FBT exemption. However they should ensure that they maintain sufficient documentary evidence to support their self-assessment, as establishment of the facts would be all-important in the event of an ATO review.

The PCG should be an important and useful step in assisting employers with managing their FBT position, and is a welcome initiative from the ATO. The ATO will also allow employers to rely on the previous draft of the PCG (PCG 2017/D14) for the year of tax ended 31 March 2018.

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