If your business makes a vehicle available for employees (including shareholder employees), and their associated persons to use privately you may need to pay fringe benefit tax (FBT). You may be liable to pay FBT even if they do not actually use it.
Exemptions from FBT on motor vehicles
Work-related vehicle exemption
A vehicle will be exempt from FBT only on days it is used for essential work purposes. To be eligible for the exemption the vehicle needs to:
- be a motor vehicle, which is defined as a vehicle drawn or propelled by mechanical power (including a trailer)
- have permanent company branding must be prominently displayed
- be drawn or propelled by mechanical power (this includes trailers)
- have a gross laden weight of 3,500 kg or less
- be mainly designed to carry goods or goods and passengers equally.
- Employees must be provided with a letter of restriction stating that the work related vehicle is not available for private use except for travel between home and work, and for travel related to the business.
- Checks need to be done quarterly (every 3 months) to make sure employees are only using the vehicles for work-related purposes.
You should also keep a record of these checks.
Vehicle made available for private use
On any days the vehicle is made available for private use (even if it is not actually used privately), the work-related vehicle exemption does not apply, and you may be liable for FBT.
Double cab utes
A common error we see is the FBT treatment of double cab utes. Utes may be considered work related as they are dual purpose vehicles, however this does not mean they are automatically exempt from FBT. These vehicles still need to meet the conditions above.
Vehicle above gross laden weight
If a vehicle above the gross laden weight is provided to an employee for private use this may need to be treated as an unclassified benefit. You should regularly check logbooks, petrol receipts etc to make sure employees are using the vehicle appropriately.
Emergency call exemption
If an employee uses a vehicle to attend an emergency call, FBT will not apply for that whole day when the employee travels from their home, and in the course of their employment provides:
- essential services relating to the operation of your plant or machinery, or the plant or machinery of your client or customer
- essential services relating to the maintenance of services provided by a local authority or a public authority
- essential services relating to the carrying on of a business for the supply of energy or fuel to the public
- emergency services relating to the health or safety of any person
- the services must be requested by a member of the public, the employer, their client or customer.
The visit must take place between 6pm and 6am during the work week, or at any time on a Saturday, Sunday or statutory public holiday. There are no time restrictions in the case of health or safety of a person.
Business travel exemption
If an employee regularly travels with a vehicle, FBT may not apply when:
- they stay away from home overnight with the vehicle
- they are away for more than 24 hours
- they need the vehicle to perform their work.
Vehicles broken down or repaired
The vehicle is exempt from FBT during any period when it is not available to be used for at least 24 hours. For example, if it has broken down or is being repaired.
Sole traders and partners in a partnership
Sole traders and partners in a partnership do not pay FBT on business vehicles they use. You instead make income tax and GST adjustments for private use of the vehicle.