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A practical guideline for private use of business vehicles

Generally speaking, when an employer makes a commercial vehicle available to an employee for their private use, a fringe benefit arises. However, an exemption from fringe benefits tax is available where the private use of an eligible vehicle is limited to that which is “minor, infrequent and irregular”.

The ATO has recognised that some methods used by employers to ensure compliance, even when private travel is relatively low, can be unnecessarily burdensome.

Therefore, the ATO has released a guideline to indicate when it will not review your arrangements to determine if the private use of an eligible vehicle is limited.

The types of vehicles that are eligible are those that are commercial in nature or are not mainly designed to carry passengers (such as a single cab utility). The vehicle must be provided to the employee as part of their job requirements, cannot be part of a salary sacrifice arrangement and must not exceed the luxury car tax threshold.

Essentially, employers can choose to rely on the guideline if:

  • they have a policy in place that limits private use of the vehicle and ensures that employees comply
  • the employee uses the vehicle to travel between their home and work and diversionary trips do not exceed two kilometres and
  • private journeys (other than travel between home and work) do not exceed more than 1,000 kilometres in total, and a return journey does not exceed 200 kilometres.

If an employer wishes to rely on this guideline they will not have to keep records to prove that private use of the eligible vehicle was “minor, infrequent and irregular.”

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