Aussies warned about using work cars on weekends

The ATO says it is “concerned” employers may have missed the memo when it comes to their employees using their work cars for leisure.

The Australian Taxation Office (ATO) has warned employers about the repercussions of their employees using work cars for personal reasons, which could include everything from moving house to the daily school run.

According to the ATO, there is a “myth” that the fringe benefits tax – a tax paid by employers on certain benefits provided to their employees – doesn’t apply to dual-cab utes.

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In fact, this FBT exemption only applies to eligible commercial vehicles as long as their personal use is limited.

That means if you’re regularly using your work ute for weekend fishing getaways or even to ferry the kids to and from school, you and your employer may have to declare this at tax time – and your employer could be facing a surprise FBT bill.

“Vehicles that are designed and used primarily for work purposes may be eligible for FBT exemption, but only if they meet specific requirements, including limited non-work-related use,” explains Elinor Kasapidis, Head of Policy and Advocacy at CPA Australia.

“If you’re using your work vehicle for regular private use, including weekend trips to the beach or camping holidays, you will not qualify for the exemption,” Ms Kasapidis explains.

So, what constitutes “limited personal use”?

In ATO speak, “limited personal use” means private trips that are “minor, infrequent and irregular”, such as diversions on the way to work that don’t exceed two kilometres in total, or private trips that do not exceed more than 200km return. The total distance limit on personal travel in any given year is 1000km.

Your commute doesn’t count, as for the purposes of FBT, the ATO classifies travel from an employee’s home to their workplace as “work-related travel”.

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Confused? Us too. Thankfully, the ATO has provided the following examples of limited private use, and private use that exceeds the acceptable threshold for an FBT exemption.

What constitutes limited private use of a work car?

“An employer provides an employee with a new panel van designed to carry a load of less than one tonne. The van is provided to the employee to enable the employee to carry bulky equipment to and from their work sites. The van is not provided as part of a salary packaging arrangement, and was acquired for a value below the applicable luxury car tax threshold.

“The van is an eligible vehicle. The van is garaged at the employee’s home and the employee uses the van to travel between their home and their place of employment. The employer has a strict policy in place about limiting the private use of the vehicle.

“The employee usually stops at the newsagent to pick up a newspaper on their way to work. The diversion adds no more than two kilometres to the total trip from home to work.

“On 10 occasions during the FBT year, the employee also transported their niece to school in the van during the employee’s journey from home to work. The journeys from home to work generally do not exceed 20 kilometres.

“At the end of the FBT year, the employer receives an email from the employee. The email outlines that multiple journeys were undertaken in the FBT year for a wholly private purpose and these journeys did not exceed 1000 kilometres in total. The employee also outlines in the email that in driving to and from work, no diversions were undertaken that exceeded two kilometres. The employer is satisfied that the employee has adhered to their policy about limited private use.”

In some circumstances, going out of your way to do the school run in your work car could tip over into not limited private use.

What constitutes not limited private use of a work car?

“Assume that the employer is aware that the van provided to the employee [mentioned above] was also used by the employee to travel to the beach on a public holiday and is not satisfied with the assurance provided.

“The employee acknowledges they used the vehicle to travel to the beach and that the return journey exceeded 200 kilometres. As each return journey must not exceed 200 kilometres, the return journey to the beach would not fall within this guideline.

“Accordingly, even though the journeys undertaken wholly for a private purpose do not exceed 1000 kilometres, the employer will need to rely on the relevant provisions of the FBT law to determine if they can access the car-related exemptions.”

How does the ATO identify non-compliance?

If you’re thinking ‘that’s pretty hard to prove, ATO’, you might be in for a nasty shock.

“The ATO data matching processes use a range of internal and external data from a variety of sources to identify FBT non-compliance,” an ATO spokesperson said in a statement.

This can include state registration data, tax returns and searching for red flags like “treating cars as 100 per cent business use even though they’re available for private purposes” or “not having a valid log book”.

More information on how FBT applies to cars can be found here. Taxation varies greatly depending on individual circumstances and if you’re in doubt, contact a qualified accountant.

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