Did you know that your Ute, or Van may be subject to Fringe Benefits Tax?

Firstly what is Fringe Benefits Tax (“FBT”)

FBT is a tax that is payable on certain benefits that you either give or pay your employees and associates (ie wife or partner).  This encompasses many things but today I am just going to look at vehicles. 

If you give a ute or van to your employee to use (remember a lot of people who we pay as contractors are getting classified as employees so we need to be aware) then this is classified as a benefit and you will need to consider if FBT applies.

Also if you are operating as a trust or company, then by being a director you may be classified as an employee.  ATO’s net for FBT can be very wide and you should always seek clarification on this as getting it wrong can be very costly.

Certain Vehicles are Exempt from FBT

But I drive or provide a ute, aren’t these exempt?  Not all are!

There is a common belief that ute’s are exempt from FBT, but there are certain conditions that must be met first. They include that the private use of such a vehicle is limited to:

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

The point you need to consider is this. If you own only 1 vehicle then meeting the 3rd point above of “minor, infrequent and irregular” may be difficult to prove and result in your ute being subject to FBT.

Do you or the person you have given the ute to utilize the vehicle for carrying motor bikes on weekend trips, travelling to see friends or going to the shops?  If so, then it is likely that the use is more than minor, frequent and regular, hence it won’t be exempt from FBT.  You may want to consider other options like buying a cheap car for private trips.

Assuming you do meet the above conditions then the vehicle itself needs to satisfy certain criteria including:

  • Designed to carry a load of one tonne or more
  • If having a designed load capacity of less than one tonne that they are not designed for the principal place of carrying passengers.  So if more that 50% of the load capacity could be used by passengers than it won’t qualify.

To save you getting out the scales and doing the calculations the ATO kindly provides a list of exempt vehicles on their website at www.ato.gov.au.

Getting this wrong can be very expensive, ie a $30,000 vehicle could result in an annual FBT liability of $6,000 per annum.

Therefore if you have any questions prior to purchasing a new vehicle always check with us to make sure that you will not get a nasty ATO bill.

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