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ATO attempts to close popular FBT loophole

Adam Zuchetti
Adam Zuchetti
07 February 2018 1 minute readShare
Driving on a highway at high speed

Employers and tradies who operate company vehicles are being warned to prepare for a change in the ATO’s approach to fringe benefits tax.

Murray Howlett, a tax partner at Brisbane-based Pilot Partners, said the ATO is seeking input into new guidelines which he believes will have a substantial impact on how FBT is scrutinised.

“It’s a situation where employers have a view that all utes are FBT-free and lack of audit activity by the Tax Office has reinforced the view,” he said.

“Unfortunately under draft new guidelines released by the ATO, many employers may find themselves exposed to FBT on these vehicles.”

Mr Howlett said that in order to remain complaint and avoid unwanted tax bills, employers will need to introduce a major “cultural shift” among workers quickly.

“Business[es] will require a radical change of culture around the use of the work ute by staff,” he said.

Currently, work utes are exempt from FBT where they are used for “minor, infrequent and irregular” personal use.

If the ATO gets its way, that rule will effectively be scrapped in favour of an “all or nothing test”, said Mr Howlett, where that approach will only apply to journeys that deviate from a normal route between home and work by less than 2km, such as to do a school run or pick up groceries on the way home.

“Most employers don’t realise that the full cost of the ute will attract FBT if this test is failed,” said Mr Howlett.

The change may be a good time for business owners to review a raft of other FBT and even GST liabilities, given that many businesses unwittingly pay the ATO too much tax by not claiming their full deduction entitlements.


ATO attempts to close popular FBT loophole
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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