What is ‘minor, infrequent and irregular’ private use? - Determining an employee's private use of a vehicle for the purposes of the car-related Fringe Benefits Tax exemption.
On 18 December 2017 the Australian Tax Office (‘ATO’) released Draft Practical Compliance Guideline PCG 2017/D14 on determining an employee's private use of an eligible vehicle for the purposes of the car-related Fringe Benefits Tax(‘FBT’) exemption.
During the festive season, and with the end of the FBT year just around the corner, the release of the draft Guideline is a reminder for employers to ensure their employees’ private use of vehicles is ‘minor, infrequent and irregular’ where they wish the eligible vehicles to be exempt from FBT.
The FBT exemption applies to vehicles such as panel vans, utility vehicles (single cab and certain dual cab utes) and other commercial vehicles (that is, one not designed principally to carry passengers).
The draft Guideline seeks to provide employers with more certainty and clarity as to the circumstances in which the Commissioner will not dedicate compliance resources to determine if the private use of a vehicle by an employee meets the car-related FBT exemptions.
PCG 2017/D14 provides a bright line test to determine how much private travel is allowed before it is considered greater than ‘minor, infrequent and irregular,’ and the FBT exemption becomes null and void. It states that you can rely on the Guideline if the following applies:
your employee uses the vehicle to travel:
- Between their home and their place of work, and any diversion adds no more than two kilometres to the ordinary length of that trip;
- No more than 750 kilometres in total for each FBT year for multiple journeys taken for a wholly private purpose; and
- No single, return journey for a wholly private purpose exceeds 200 kilometres.
Should you choose to rely on the Guideline, you do not need to keep records about your employee's use of the vehicle that demonstrates that the private use is 'minor, infrequent and irregular.’
You will, however, need to ensure that the relevant employees’ private use of the cars continue to meet the requirements for each year you provide the vehicle and wish to rely on the Guideline.
Comments from the public regarding the draft Guideline are due by 9 February 2018. Once finalised, the Guideline will apply to car and residual Fringe benefits provided in the FBT year ended 31 March 2018, and later years.