If your business is in any way mobile and relies on vehicles to make it "tick," you need to be aware of certain tax rules. In particular, you need to know about fringe benefits tax and how this obligation can apply separately to cars or vans. What do you need to be aware of?

Vehicles and Fringe Benefits Tax

The ATO segregates different vehicle types according to whether they are a "tools of the trade" car (such as would be used by a sales rep) or a "workhorse" (such as a service or supply van). Certain procedures need to be followed, and the amount that a particular employee uses the said vehicle may determine the number of fringe benefits tax payable.

Tools of the Trade Cars

As you may expect, the rules are a little complex. However, for example, a company with many "tools of the trade" cars can apply the simplified method when calculating fringe benefits tax. In this case, the employee will be able to use an average business use percentage for all the vehicles in its fleet, subject to certain conditions.

Workhorse Vehicles

Where an employee is provided with a van primarily designed for utilitarian purposes and not classified as a car, per se, any kilometres driven for private use may be exempt from fringe benefits tax. There are limits to how many kilometres can be driven in each tax year for a fully private purpose and other limits that relate to the total length of an individual journey.

Under these rules, an employee may be able to make certain small diversions for purely private travel purposes between their home and place of work. Some of the keywords that the tax authority uses here are minor, infrequent and irregular, and as long as these words are applicable, the employer may not be required to keep special records to back up the exemption.

Providing Data

If personal use is not easy to qualify and back up, an employer may need to keep more detailed records related to vehicle usage during the tax year. However, it's important to fully understand the rules as they may apply in different ways to various categories or types of vehicles.

Understanding the Detail

The tax authority goes into far more detail about fringe benefits tax and exempt motor vehicles, and it's best to be aware of the implications. It is also important to file a fringe benefits tax return in any given year, even if you may have no legal obligation per se. In this case, it may be possible to reduce any potential audit window, even where no fringe benefits tax is payable.

Further Information

To fully grasp where you stand in relation to fringe benefits tax, it's always a good idea to talk with a tax accountant.