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ATO clarifies position on FBT claims

Jotham Lian
Jotham Lian
04 April 2018 2 minute readShare
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Accountants and tax agents have welcomed the Tax Office’s clarification on its attempt to crack down on a popular fringe benefits tax deduction.

The ATO’s draft guidance clarifying “minor, infrequent and irregular” private travel for work vehicle exemptions for fringe benefits tax has been welcomed by practitioners as FBT lodgement nears.

It comes after a Brisbane-based tax partner warned that the use of company vehicles would be heavily scrutinised in the forthcoming tax season.

According to the ATO, a fringe benefit is an exempt benefit where the private use of eligible vehicles by current employees during an FBT year is limited to work-related travel, and other private use that is “minor, infrequent and irregular”.

However, feedback from the industry on the uncertainty around “minor, infrequent and irregular” use has seen the tax office release practical guidance on certain conditions that aims to reduce compliance costs and provide certainty for practitioners.

According to the guidance, employers do not have to keep records about their employee’s use of the vehicle if the 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.

While still under development, the ATO has confirmed the final guidance will be published this month and will apply to car and residual benefits provided in the 2018 FBT year and later years.

Nexia senior taxation consultant Dean Birch told My Business’ sister publication Accountants Daily that the new guidance would make it easier to determine if exemptions would apply for eligible vehicles as opposed to previous record-keeping intensive treatments.

“If it's a work vehicle, like a ute or panel van that you use predominantly for work and there's a limitation on private use, they've proposed a concession on certain things that you can do,” he said.

“Before, if you made a detour — say, dropping your kids at school, or if you went to a newsagent to pick up the paper, or doing something private, that would knock you out because there’s some private use there but now they are saying you can do that if it’s not more than a 2-kilometre detour.

“This is more of a safe harbour that they are proposing to put in there but again it is only a safe harbour, it doesn't mean that you won't get the exemption if you're outside of these rules, it just means you have to self-assess as you normally would do.”

Speaking on Tax and Super Australia’s podcast, A&A Tax Legal Consulting assistant manager Simon Dorevitch said the guidance has provided much needed clarity on an issue that has tripped up tax practitioners in recent times.

“There hasn’t been a whole lot of guidance on what is minor and infrequent and irregular so people have been unsure whether or not they can apply this exemption,” said Mr Dorevitch.

“I imagine there are many people who are taking a conservative approach.

“The guidance has introduced some safe harbour amounts where the ATO says if the other private use is below these amounts then we’ll accept that private use does meet the definition of minor and infrequent and irregular.

“It’s probably quite easy to go over those amounts but at least people know where they stand now.”

ATO clarifies position on FBT claims
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Jotham Lian
Jotham Lian

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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