Fringe Benefit Tax

Penrith Accountant - Fringe Benefit Tax

In April 2011, the Australian Tax Office will be writing to selected employers about exempt vehicles and car fringe benefits.

If you are an employer, who is not registered for FBT and has registered a business vehicle listed on Fringe benefits tax - exempt motor vehicles, the ATO may write to you to  remind you of the limited private use eligibility criteria for exempt vehicles. Basically vehicles with a carrying capacity of less than one tonne such as taxis, panel vans and utilities may be exempt from FBT if the private use of the vehicle is limited to:

  • travel between home&work
  • travel that is incidental to travel in the course of employment related duties
  • non-work related use that is minor, infrequent and irregular e.g. occassional use of the vehicle to remove domestic rubbish.

The ATO is also contacting some employers who have registered a new business vehicle to ensure they are aware that non-business usage of the vehicle may result in a FBT liability.

What is a car fringe benefit?

A car fringe benefit most commonly arises where you (the employer) make a car you 'hold' available for the private use of an employee (or the car is treated as being available). A car you hold generally means a car you own or lease.

The following types of vehicles (including four-wheel drive vehicles) are cars:

motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more)
all other goods-carrying vehicles designed to carry less than one tonne, and
all other passenger-carrying vehicles designed to carry fewer than nine occupants.

You make a car available for private use by an employee on any day that:

it is actually used for private purposes by the employee, or
the car is available for the private use of the employee.

A car is treated as being available for private use by an employee on any day that:

the car is not at your premises, and the employee is allowed to use it for private purposes, or
the car is garaged at the employee's home.

A car that is garaged at an employee's home is treated as being available for the private use of the employee regardless of whether they have permission to use it for private purposes. Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.

As a general rule, travel to and from work is private use of a vehicle.

Where a car is in a workshop for extensive repairs, for example, following a motor vehicle accident, it is not available for private use of the employee. However, a car is considered to be available for private use where it is in the workshop for routine servicing or maintenance.

Private use of a motor vehicle that is not a car may give rise to a residual fringe benefit.

If you hire a car for less than three months, you are not considered to 'hold' the car and it will not result in a car fringe benefit. However, if you make a rental car or taxi available for the private use of an employee, and the car is hired for less than three months, a residual fringe benefit may arise.

For further information ring (02) 4731-1405  A Grade Tax Accountants Penrith for all your accounting, taxation, superannuation, SMSF advice, bookkeeping, tax returns, tax planning and advice for Individual and Business clients.

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