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Look out! The ATO is Cracking Down – Company Cars & Fringe Benefits Tax

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Do you drive a company car or own a company registered vehicle?

If so, please take note of the Fringe Benefits Tax (FBT) updates highlighted below.

The Australian Tax Office (ATO) have recently warned about tightening-up on their approach towards people who own vehicles through their businesses – particularly, employers and tradies.

Even if your company car has previously been exempt from FBT, you may now need to prove that any private usage is minor, infrequent and incidental. This includes vehicles that carry over one tonne and were previously exempted.

According to the ATO, any travel that deviates from a normal route between home and work (by more than 2kms) will be considered private use.

For all the parents out there, occasional day-to-day school runs or picking up groceries on the way home will still be considered as minor, infrequent or irregular use, as long as it doesn’t deviate more than 2km away from your usual home and work route.

 

Restrictions on Duel Cab Utes

The ATO is also restricting the FBT exempt vehicle definition, particular for Duel Cab Utes. They are looking closer at the carrying weight of Duel Cab vehicles.

The ATO could potentially reduce the carrying weight, meaning that it will no longer be an FBT exempt vehicle. As a result, some utes could now fail the FBT exempt definition. If your ute fails the test, the full cost of the vehicle could attract FBT.

The general assumption that all utes are FBT-free and lack audit activity by the Tax Office, is no longer true. Under the ATO’s new guidelines, many employers may find themselves exposed to FBT on these vehicles.

To remain compliant and avoid unwanted tax bills, employers and tradies will need to rapidly introduce a cultural shift among workers regarding the usage of their work vehicles.

The ATO has actually threatened further audit activity in relation to these vehicles. So, please be careful and don’t take any risks. We encourage you to review your potential FBT exposure as soon as possible, and confirm that you are in the clear with your accountant.

 

How to protect yourself from FBT exposure

The best way to protect yourself is to maintain a logbook for all motor vehicles held within your business. Yes, I can already hear your aggrieved sighs!

Sure, recording in a logbook may be a bit of a pain or inconvenience at the start, but there are now some great phone apps and other tools available to make it as quick, easy and as simple as possible.

Don’t worry, you won’t have to maintain a log book for each day of the rest of your life. In terms of a time frame, you will only need to maintain a logbook for at least 12 consecutive weeks during the income tax year. Phew!

This is keeping in mind that the 12 week period is representative of your travel throughout the year.

If you start recording your logbook less than 12 weeks before the end of the financial year, the 12-week period can continue into the next year. Therefore, you can still use the determined work/private use percentage for the prior year.

Important Note: If your pattern of motor vehicle usage or circumstances change significantly, including a new vehicle purchase, a new logbook must be prepared.

 

What do you need to record in your logbook?

Here’s a brief summary of what you need to include in your logbook to satisfy the ATO:

General Logbook Details

  1. The beginning and end dates of the Logbook period
  2. Your car’s odometer readings (At the beginning and end of the logbook period)
  3. The total number of kilometers the car has travelled (During the logbook period)
  4. The business-use percentage (During the logbook period)
    • If you’re not sure how to calculate this, your accountant can help.

Trip Specific Details

  1. Start and finishing date/s of the journey
  2. Reason for the journey
  3. Odometer readings at the start and end of the journey
  4. Total kilometers travelled
    • Note: If you are a tradie or travel a lot for work, you can record two or more journeys as a single trip – given that they are in a row and on the same day.

 

Where can I get one?

I’m so glad you asked.

You can obtain a paper logbook from most service stations or a local Office-works. Alternatively, you can download a FREE phone application that acts as an ATO compliant Vehicle Logbook. This may be easier for those of you who are phone savvy.

Our suggested app is ‘DriversNote’ which can track you travel automatically.

All you need to do is indicate if the trip is private or business related and add extra details such as the description and odometer readings (as mentioned above).

Once you’ve completed the 12 weeks, you can export the logbook to a PDF format. We highly suggest that you do this for easy reference and safe-keeping.

To find out more information about the “DriversNote” logbook app – click here.

Note: When you search “DriversNote” in your App Store, it may come up with a different name (refer to picture on the right). Once you’ve downloaded it onto your phone it should be called the correct name. If in doubt just look for the the below logo:

 

 

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