The amount of Fringe Benefit Tax payable depends on the value of the motor vehicle benefit. Sounds simple enough right? However the common complaint about Fringe Benefit Tax (FBT) is that calculating the correct FBT rate for vehicles (one of the most common employee benefits) is way too complex. Mistakes arise from not properly understanding the circumstances in which provision of a vehicle to an employee for private use is subject to FBT.
Here’s three classifications of motor vehicle usage subject to FBT rules.
Private Use Vehicle: As akin to a catch-all, if a company motor vehicle is made available to an employee for private use (exemptions aside), it is likely to be subject to FBT payable. Private use is generally denoted by use, or availability for use of the vehicle outside of business purposes.
Work-Related Vehicle: A vehicle may qualify as a work-related vehicle, exempt from FBT if it meets these conditions:
- sign written.
- not designed principally to carry passengers (e.g. a work van).
- stored at an employee’s home (as a condition of employment).
- not be available on particular days for private use.
Pool Vehicle: A pool vehicle is another category that can be exempt from FBT. Pool vehicles are shared among employees for business use and should not be used for private purposes. These vehicles are normally permanently kept on the business premises when not in use. Exemptions can arise when an employee’s home ‘might’ qualify as a place of work.
With so many complexities it is no surprise that FBT vehicle calculation errors occur – which begs the question as to whether current FBT calculation rules are fit for purpose? If in doubt – ask your advisor.