BDO submission on PCG 2017/D14

This submission was originally published on 9 February 2018.

BDO welcomes the opportunity to provide feedback in response to Draft Practical Compliance Guideline PCG 2017/D14 (‘PCG 2017/D14’) – Exempt car residual benefits: compliance approach to determining private use of vehicles that was released by the Australian Taxation Office (ATO) on 18 December 2017.  PCG 2017/D14 sets out general principles for determining when an employer does not need to comply with substantiation requirements for vehicles provided to employees when their private travel is relatively low to maintain FBT exemption status under subsections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

This BDO submission, lodged on 9 December 2018, recommends:

  • When finalised, PCG 2017/D14, have prospective application from FBT year commencing 1 April 2018, in order for affected stakeholders to modify their administrative practice to comply with the safe harbour conditions for relief;
  • Clarification on whether PCG 2017/D14 applies to private use of vehicles under both subsections 8(2) and 47(6);
  • Clarification on, and potential simplification of, the substantiation requirements in order for employers to properly ascertain whether any private vehicle use is “minor, infrequent and irregular”.  BDO recommends that employees complete an annual declaration warranting such minor usage;
  • Extending the safe harbour rules beyond the limited class of vehicles currently envisaged.  In particular, to non-commercial vehicles and/or those that are salary packaged; 
  • Expanding and clarifying that the safe harbour rules include eligible vehicles used by service providers, i.e. individuals who provide a service and the vehicle is a tool of trade necessary to deliver that service (such as a plumber);
  • Removing the prohibition that vehicles cannot benefit from the safe-harbour relief if they fitted with non-business accessories as the focus of the safe harbour relief should be on the usage of the vehicle;
  • Removing the condition that eligible vehicles is below the Luxury Car Tax Limit, considering the market value of many commercial vehicles can exceed the luxury car limit;
  • Substituting the specific numeric test of what constitutes “minor, infrequent and irregular”, with a test that provides a relative or proportional result, namely in percentage terms.  For example, private use of less than 10%;
  • Further examples that reflect both contemporary and practical scenarios of using eligible vehicles for private use;
  • The reference to diversion take into consideration the practicalities of travel; and
  • Consideration of employees who change work locations and therefore diversions.

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