Hayley Lock, David Sofrà and Stacey Biggar discuss the ATO's recent draft guidance on FBT exempt vehicles.
In December 2017 the Australian Taxation Office (ATO) released draft Practical Compliance Guideline (PCG) 2017/D14 Exempt car and residual benefits: compliance approach to determining private use of vehicles. It’s a positive step to see this draft PCG published and the commitment from the ATO to reduce fringe benefits tax (FBT) red tape. However it will be important to use the public consultation process well in order to give the final PCG the best chance of providing genuine practical benefit for employers.
The draft PCG sets out a “safe harbour” methodology to apply the car and residual motor vehicle fringe benefit exemption in subsections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). To apply the exemption, there are two key considerations under the FBTAA:
Most employers are able to identify eligible vehicles types, however up to now there has been minimal guidance on how to determine what constitutes minor, infrequent and irregular private use.
Where the employer chooses to follow the PCG (see the criteria below), the employer will only be required to keep records that substantiate its compliance with those criteria.
The draft PCG’s criteria are:
The draft PCG provides an example of how to perform an annual check based on odometer readings and the employee’s travel distance from home and work. In practice, this would rarely produce a reliable result, as most eligible vehicles would travel significant distance in the course of the employee actually carrying out his or her work.
KPMG is preparing a submission on the draft PCG to be lodged by 9 February 2018. Should you have any further questions or comments to be included in our submission, please do not hesitate to contact us.