Where a car owned or leased by an employer is made available to an employee, a car fringe benefit may arise. For FBT purposes a car is any of the following:
- A sedan or station wagon;
- Any other goods-carrying vehicle with a carrying capacity of less than one tonne; or
- Any other passenger-carrying vehicle designed to carry fewer than nine passengers.
If an employer supplies a vehicle to an employee which does not satisfy the above criteria and the car is used privately, the right to use the vehicle can be a residual fringe benefit.
An employer makes the car available for an employee’s private use when an employee or their associate:
- Uses the car for private purposes; or
- Is permitted to drive the car for private purposes.
A car garaged at or near to an employee’s home is treated as available for the employee or the employee’s associates private use, regardless of whether the employee or employee’s associates have permission to use the car privately.
Usually, travel to and from work is treated as private use of the vehicle, but there are some exceptions.
For example, an employee’s private use of a taxi, panel van or utility designed to carry less than one tonne is exempt from FBT if the private use of this vehicle is limited to:
- Travel between home and work;
- Incidental travel in the course of performing employment-related travel; and
- Non-work-related use that is minor, infrequent and irregular
Other benefits supplied by an employer to an employee in relation to cars, whilst not constituting a car benefit, may instead constitute another type of fringe benefit. For example, where the employer provides to the employee for private purposes:
- Payment or reimbursement of expenditure on toll roads (expense payment fringe benefit);
- Use of the employer’s toll tag (residual fringe benefit); and
- Car parking (car parking fringe benefit).
FBT and Employee Declarations
Employers must ask their employees to sign a no-private-use declaration for a qualifying business-related benefit to be an exempt fringe benefit e.g. overseas business travel. Employee declarations must be in the format required by the Australian Taxation Office (ATO). Employers can receive employee declarations electronically, but the declaration must be signed by the employee using an electronic signature. Employers are obligated to obtain all employee declarations by the employer’s FBT return lodgment date, or by 21 May if the employer is not required to lodge an FBT return. Declarations should not be sent to the ATO, although employers are required to keep the declarations as a part of their business records. Different declarations may be used for different types of expenditure and for different employees in the same FBT year (ending 31 March).
How can Nexia Edwards Marshall NT help you?
Please contact Sarah McEachern or your Nexia Edwards Marshall NT Adviser for assistance with your FBT return and employee no-private-use declarations.