As tax time edges closer, it’s important to know the different kinds of tax you’re liable for so you can avoid penalties. One you may need to think about for the first time is Fringe Benefits Tax (FBT). When you have a fleet of vehicles that are also available to employees for private use (like driving to and from work), you’re liable for FBT. This includes cars, station wagons, utility vehicles and more. If you’re managing a fleet of utes, this probably hasn’t been on your radar. In the past, they’ve effectively been considered exempt from FBT as the rules were largely open to interpretation. But from April 1, this will change.
Here’s what you need to know.
What the changes mean for you
From next month, the Australian Tax Office (ATO) will enforce strict new limits on private use of employer-provided vehicles. Essentially, utes will now attract fringe benefit tax, unless:
- Your employee only uses the vehicle to travel between home and work – with no diversion that adds more than 2km to the trip
- Multiple journeys for private use account for no more than 750km for each FBT year (this amounts to less than 15km each week on average)
- No single return journey for a private purpose exceeds 200km
- The vehicle has non-business accessories (so say good bye to your pimped-out utes)
Basically, if you haven’t been calculating FBT for work utes up until now, it’s time to start.
How to calculate FBT
Most businesses use one of two ways to determine FBT liability:
- Keep a logbook to track operating cost for each vehicle
- Use a standard calculation known as statutory fraction
Keeping a manual logbook is a pretty tedious process, so many businesses rely on the statutory fraction method. But this is based on a flat rate of 20 per cent, which means you could end up paying a lot more than you’re required to.
The good news is: there’s an easier method. With an electronic logbook, you can capture all the necessary information from your vehicles on the go. When your drivers start the vehicle, they identify themselves using a PIN number and select the purpose of the trip (work or private). At the end of the journey, that logbook entry is fed straight into a report so you can submit it to the ATO.
The benefits of an electronic solution
Nobody likes completing paperwork, especially after a long day. But there are other benefits to simplifying the process with an electronic logbook.
- You’ll minimise your FBT liability by clearly establishing business use
- Accurate data means you don’t have to worry about logbooks being voided by the ATO
- It also gives you more insight into how employees are using their vehicles
- Automating the process minimises admin costs and means office staff can focus on other important tasks