By Ali Suleyman - October 15, 2018
It is common for many businesses to provide motor vehicles to employees to perform their employment duties. In order to stay competitive and attract the best talent, businesses provide certain exempt vehicles, such as utes, as part of an employment package and make them available for the private use of their employees. These vehicles may be fully exempt from FBT notwithstanding some private use of these vehicles by employees. However, where the private use of the vehicle exceeds certain thresholds, then the employer becomes liable to FBT in respect of all of the private usage of the vehicle.
PCG 2018/3 became effective on 1 April 2018 and clarifies the ATO view on minor, infrequent and irregular use of work vehicles and highlights the steps that employers need to take in order to mitigate the risk of additional FBT. Listed below are some of the key questions that need to be asked following the issue of PCG 2018/3:
The Pitcher Partners Employment Taxes team would be pleased to assist you in any review of your exempt vehicle records and policies.
"Eligible vehicles” which broadly include certain types of taxis, panel vans, single cab utes, dual cab utes, four-wheel drive vehicles, modified vehicles and other road vehicles.
Eligible vehicles may be exempt from FBT where, among other things, the private use of those vehicles by employees is limited to travel between their home and place of work and otherwise is minor, infrequent and irregular.
Until recently it was left to the discretion of employers to determine what level of private usage met the criteria to exempt an eligible vehicle from FBT.
The ATO released PCG 2018/3 to provide certainty to employers and outlined their compliance approach to the FBT exemption for exempt vehicles. While this guidance does not have legislative force, it acts as an important guide for employers to determine an acceptable level of private use for the purposes of the FBT exemption.
According to PCG 2018/3, the private use of an eligible vehicle is considered minor, infrequent and irregular where:
Where an employee’s private use of an eligible vehicle exceeds the thresholds as outlined in PCG 2018/3, the FBT exemption may not apply. Accordingly, employers will need to account for all of the private use of exempt vehicles in these circumstances.
Where an eligible vehicle does not qualify for the FBT exemption, different valuation rules and substantiation requirements apply depending on whether the vehicle is a Car Fringe Benefit or a Residual Benefit. A brief summary of the FBT treatment of each type of vehicle is set out in the table below.
Benefit type |
Car Fringe Benefit |
Residual Vehicles |
Carrying capacity |
Under one tonne |
Over one tonne |
Valuation method |
Statutory formula or Operating Cost |
Cents per kilometre or Operating Cost |
Substantiation requirements |
Log book is required to use the operating cost method |
Log book is advisable, but no legislative requirement to maintain. Reasonable estimate of private kilometres substantiated by an employee declaration is acceptable. |
In order to be able to rely on PCG 2018/3, employers and employees must satisfy the following conditions:
Where all of those criteria are satisfied, the employer can rely on PCG 2018/3.
Employers do not need to apply this Guidance Statement. The advantages of applying PCG 2018/3 are:
Where the employer chooses not to rely on PCG 2018/3, it nevertheless serves as an instructive guide on the acceptable level of private use for the purposes of claiming the relevant FBT exemption.
We recommend that employers undertake the following:
If you have any queries or would like more information, please contact a member of the Employment Taxes team or your usual Pitcher Partners expert.
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