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The ATO’s draft guidance clarifying “minor, infrequent and irregular” private travel for work vehicle exemptions for fringe benefits tax has been welcomed by practitioners as FBT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.
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New FBT guidance welcomed
04 April 2018
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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 PCG 2017/D14 that sets practical guidance on certain conditions that aims to reduce compliance costs and provide certainty for practitioners.
According to PCG 2017/D14, 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 PCG will be published this month and will apply to car and residual benefits provided in the 2018 FBT year and later years.
Speaking to Accountants Daily, Nexia senior taxation consultant, Dean Birch, said 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,” said Mr Birch.
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“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.”
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