Published on Sep 10, 2018

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New guidelines for fringe benefits tax (FBT) on company vehicles have been released from the Australian Tax Office (ATO).  Experts are warning small-to-medium enterprise owners to ensure work vehicles are used correctly by their employees.

The supply of a company van or ute to an employee has often operated in a grey area in relation to the ATO. A company vehicle was always intended to be primarily used for business purposes, and there was some wriggle room on personal use.

The main changes

 In order to claim a FBT exemption, the vehicle must comply with the list of ATO approved vehicle types, and be primarily used for business related purposes.

There is also some provision for an employee to travel between home and work, and “minor, infrequent and irregular” non-work related use. This was the main grey area.

What  does the ATO define as “minor, infrequent and irregular”?

Employees are now allowed up to 1,000 kilometres of private travel in company vehicles per year as long as no single return journey exceeds 200 kilometres. So probably no more driving holidays to Queensland with the family.

The guidelines apply to the 2018 FBT year and onwards.

This isn’t a change in the current rules so much as a clarification of the current terms.

What happens if you are caught exceeding the new guidelines?

Businesses caught exceeding the guidelines around private usage of company vehicles could be liable for an unexpected penalty of 20 percent of the purchase price.

On a $50,000 car you could be looking at a tax bill of $10,000!

Always check with your registered tax accountant to make sure you don’t get any nasty surprises.

For more information on FBT regulations contact the ATO or click here to see a list of eligible vehicle types.