Breaking Down FBT for Work Vehicles

The humble ute is the lifeblood of a tradesperson. It goes everywhere, it carries (most of) what you need and it’s the perfect compliment to a weekend away. While it’s completely normal to use your work ute for personal uses, businesses need to be aware of their liabilities for fringe benefits tax (FBT) if they allow employees to use a work vehicle for personal purposes.

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Contrary to a common myth, simply being a dual-cab ute does not automatically make it exempt from FBT. To be exempt, the vehicle must satisfy two conditions:

1. It must be an “eligible vehicle”: For example a vehicle designed to carry a load of one tonne-plus, more than eight seats including driver or a vehicle not primarily for carrying passengers if its load is less than one tonne.
2. The private use must be “minor, infrequent and irregular”: For example, the odd dump run, rather than regular personal trips like school drop-offs, shopping errands, beach or camping outings.

If those conditions are not met, the vehicle may be treated as a “car fringe benefit” and FBT obligations apply. The four key steps for businesses to remain compliant are:

1. Identify the type of fringe benefit being provided (such as vehicle use).
2. Determine the taxable value of the fringe benefit (using guides and calculators on the Australian Taxation Office (ATO) website).
3. Lodge, report and pay FBT: Make the annual FBT return, report each employee’s “reportable fringe benefits amount” via Single Touch Payroll or on their payment summary, and pay any tax owed.
4. Keep records: Maintain logbooks, receipts and calculations even if the business thinks it may be exempt.

The FBT year runs from 1 April to 31 March, with the return and payment due by 21 May (or 25 June if using a tax agent). Different benefits have different record-keeping requirements, so businesses should stay organised to avoid unexpected liability.

This article is intended for general information only and should not be taken as tax advice. Tradespeople should always seek guidance from a licensed tax professional or accountant to discuss their specific circumstances and obligations.

Image courtesy of Doug Bagg, Unsplash.

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