As we approach the end of the Fringe Benefits Tax Year 2020/21, we want to issue a reminder to all employers that a motor vehicle odometer reading needs to be taken on the 31st March 2021, for the purposes of a Car Fringe Benefits Tax obligation.
This reading is one of the annual requirements for the Operating Cost Method of FBT calculations for the FBT Year ending 31 March 2021. Your odometer readings need to highlight the start and end mileage of the past FBT Year for all vehicles.
What happens where a vehicle is stored at an employee home due to COVID-19?
The ATO has announced that an employer isn’t holding a car for the purposes of providing Fringe Benefits to an employee where a work-car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for maintenance purposes.
Provided that the employer elects to use the Operating Cost Method and maintains odometer records, the employer will not have an FBT liability for the car.
Without electing to use the Operating Cost Method or not having odometer records, the Statutory Formula Method applies and an FBT liability will arise as the car garaged at the employee’s home is taken to be available for private use.
Employers can also take into account the impact of COVID-19 on the business use of a car if it is being driven during the period it is garaged at home. This will require you to maintain a logbook (or to have kept a logbook in any of the previous four years) which will enable you to calculate your FBT liability, and odometer records for the period in question.
What happens where COVID-19 has impacted the driving patterns of business vehicle use?
For any car Fringe Benefits calculated using the Operating Cost Method, you may adjust your business use estimates to reflect changes in your employees' driving patterns due to COVID-19.
If you are making a reasonable estimate of the business use, you can adjust the use indicated from the logbook to account for the change in driving patterns from COVID-19 impacts.
However, you must ensure that the logbook still records a period of at least 12 weeks - if the logbook does not reflect a 12-week period you cannot apply it to reduce the taxable value to take business use into account.
Important Changes to 'Workhorse Vehicles'
Furthermore, it is important to note that the ATO has provided safe harbour guidance acknowledging where a vehicle meets the definition of a 'workhorse vehicle', and provided that the private use of the vehicle satisfies the select conditions, that the vehicle will continue to be exempt from FBT.
We've outlined these conditions below:
- any diversions for private travel between the employee's home and their place of work and these journeys add no more than two kilometers to the ordinary length of that trip (e.g. dropping children off at school on the way to work);
- no more than 750 kilometers in total for each FBT year are taken for a wholly private purpose (i.e. multiple journeys); and
- no single, return journey undertaken by the employee that is for a wholly private purpose exceeds 200 kilometer.
Please note, a 'workhorse vehicle' is defined as a panel van, utility (ute) vehicle or other commercial vehicle (that is, not designed principally to carry passengers).
With just under a week remaining before the end of the FBT year, you had better act fast - as missing out could you leave you furious.
For More Information
For more information in relation to FBT liabilities surrounding motor vehicles, or if we can be of assistance in this matter, contact your Archer Gowland Redshaw adviser on (07) 3002 2699 | (07) 3221 4004.