FBT Exempt Vehicles

Provision of a motor vehicle for private use is, in general, a benefit which is taxable under the fringe benefit tax rules. A “motor vehicle” is any motor-powered road vehicle (including a 4 wheel drive vehicle).

Provision of a vehicle may be exempt from FBT when (1) the vehicle is one of those listed as a vehicle capable of being exempt, and (2) when private use of the vehicle is strictly limited to so-called ‘work-related travel’ which can include some minor elements of private travel, and travel between home and work.

1. Vehicle Type and Design

To be eligible for FBT exemption, a vehicle must meet the basic usage conditions (set out below) and be one of the vehicle types in the List of Vehicles Capable of Being Exempt below.

In general, the vehicle must be:

  • a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne, or
  • designed to carry a load of one tonne or more, or more than eight passengers, or
  • other vehicles: if designed to carry a load of less than 1 tonne, not a vehicle designed for the principal purpose of carrying passengers

List of Vehicles Capable of Being Exempt

Until May 2017, the ATO maintained lists of vehicles indicating which were considered eligible and ineligible for FBT exemption.

Those lists have since been replaced with a list of guidelines for eligible vehicle types which is reproduced below:

Taxis

Taxis qualify for the work-related use exemption if they are owned or leased and designed to carry a load of less than one tonne and fewer than nine passengers.

See subsection 8(2) and 47(6) Fringe Benefits Tax Assessment Act 1986.

Panel van – solid rigid-bodied, non-articulated car, smaller than a truck, without rear side windows

Panel vans qualify for the work-related use exemption.

See subsection 8(2) and 47(6) Fringe Benefits Tax Assessment Act 1986.

Single cab ute

Single cab utility trucks qualify for the exemption.

See subsection 8(2) and 47(6) Fringe Benefits Tax Assessment Act 1986.

Dual cab ute

– different from conventional goods vehicles with extra seats behind the driver and front passenger. They also share a common chassis which can fit a single or dual passenger cab and alternate tray section

Dual cabs qualify for the work-related use exemption only if they are not designed for the principal purpose of carrying passengers.

For an explanation on how to work out if a dual cab is eligible for the exemption, refer to MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel. [ Refer further notes below ]

Four-wheel drive vehicle (other than utilities and dual cabs)

– different from conventional goods vehicles with extra seats behind the driver and front passenger. They also share a common chassis which can fit a single or dual passenger cab and alternate tray section

Four-wheel drive vehicles qualify for the work-related use exemption if they are:

  • designed to carry a load of one tonne or more, or
  • designed to carry more than eight passengers, or
  • not designed for the principal purpose of carrying passengers.

See TD 94/19 for examples of factors to consider when deciding whether a four-wheel drive vehicle (other than a utility or dual cab) is designed for the principal purpose of carrying passengers. These factors include:

  • the appearance and presentation of the vehicle
    any relevant promotional literature
  • the emphasis evident in marketing
  • the vehicle’s specification
    load carrying capacity
    passenger carrying capacity.

Modified vehicle

Modified vehicles qualify for the work-related use exemption if, for the entire FBT year when the car is provided, a modification or alteration permanently affects the inherent design of the vehicle (for example, hearses).

See MT 2033 Fringe benefits tax: application of sub-section 8(2) exemption to modified cars.

Other road vehicle

Other road vehicles qualify for the work-related used exemption if they are designed to carry:

  • a load of one tonne or more, or
  • more than eight passengers.

See subsection 8(2) and 47(6) Fringe Benefits Tax Assessment Act 1986

Source: ato.gov.au

Other Exemptions

Unregistered vehicles held at all times by the provider and used wholly or principally in the business operations

Cars used for emergency services, fitted and marked as such, such as police, ambulance, fire services and garaged at home

– Cars for which car expenses are non-deductible under personal services entity rules

Dual cab vehicles

Dual cab vehicles may be capable of qualifying for the work-related use exemption (subject to the minor private usage requirement) only if designed to carry a load of one tonne or more, or more than eight passengers OR if having a designed load capacity of less than one tonne, they are not designed for the principal purpose of carrying passengers. (Ruling MT 2024)

The Tax Office has looked closely at dual cab vehicles, because a number of models have a load capacity of less than 1 tonne. Being designed to carry crew, the less-than-one-tonne, principal purpose test may exclude the vehicle from exemption.

The required calculation compares the designed passenger weight to the load capacity remaining (after deducting the designed passenger weight).

If the designed passenger weight exceeds the remaining load capacity, the dual cab will be subject to FBT for all private usage, and that would include trips to and from work, because it would not be considered exempt.

See also: ATO Crack Down on Dual Cab Utes – (BDO Australia).

EXAMPLE [Based on MT 2024 para 17]

Notes

The maximum loaded weight or Gross Vehicle Weight can be found from the vehicle’s compliance plate.

The Kerb Weight is “the weight of the vehicle with a full capacity of lubricant, coolant and fuel together with spare wheel, tools (including jack) and installed options. It does not include the weight of goods or occupants.” (see ATO)

The total passenger weight is calculated by multiplying Designed Seating Capacity (including the driver) by 68 kg. (MT 2024 para.15)

Assumptions

  • Designed Seating Capacity: 5 passengers
  • Gross Vehicle Weight: 2,000 kg
  • Kerb Weight: 1,400 kg

Calculations

  1. Load Capacity calculated: 2,000 kg – 1,400 kg = 600 kg [less than 1 tonne]
  2. The Load Capacity is less than 1 tonne, so the passenger weight must be considered, in order to determine whether the principal purpose is carrying passengers.
  3. Passenger Weight calculation: 5 passengers x 68 kg = 340 kg
  4. Load Capacity minus Passenger Weight: 600 kg – 340 kg = 260 kg
  5. The Passenger Weight (340 kg) is greater than the remaining Load Capacity (260 kg).
  6. The Passenger Weight represents a majority of the Load Capacity (340 kg ÷ 600 kg) = 56.67%

Conclusion:

Considered to be a vehicle designed principally for the carriage of passengers, because a majority of the total load capacity is absorbed by its designed passenger carrying capacity.

The vehicle is therefore not capable of being exempt from FBT.

s8(2) s47(6)

2. ‘Work Related Travel’

Exemption from FBT requires that the private use of a motor vehicle is limited to ‘work-related travel’, which is defined as:

  • travel between home and work
  • travel which is incidental to travel in the course of performing employment duties
  • other private travel that is minor, infrequent and irregular

ATO Guidance – minor use of a provided work vehicle

The Tax Office has released a guidance on the private use of ‘eligible’ vehicles by employees.

Where there is limited private use, the Tax Office has specified that FBT car-related exemptions could apply.

Private use is limited where the private travel is:

  • between the employees’ home and workplace; and
  • that is minor, infrequent and irregular

Under PCG 2018/3, minor, infrequent, and irregular private use includes:

  • No more than a 2 km private travel diversion between home and work;
  • No single return private journey in the FBT year that exceeds 200 km; and
  • No more than a total of 1,000 km of private travel in the FBT year.

The compliance approach for the 2019 (from 1 April 2018) and following FBT years is set out in Practical Compliance Guideline PCG 2018/3. A difference compared to the earlier Draft Guidance is that the total kilometres in a FBT year that an employee can undertake for a wholly private purpose was increased from 750 kilometres to 1,000 kilometres.

Draft Practical Compliance Guideline PCG 2017/D14 (now finalised by PCG 2018/3) explains when the Commissioner will not apply compliance resources to determine if the private travel meets the exemption requirements. The draft guidelines are to apply for the 2018 FBT year. See commentary.

136(1) FBTAA 1986

Consequences of Work Related Travel Requirements Not Being Met

If the work-related usage requirements are not met, the ATO deems a fringe benefit has been provided.

The nature of the fringe benefit will be characterised by the type of vehicle involved.

If the vehicle is a car, all private use (including home work travel) is taken into account as a car fringe benefit. Either the operating cost or statutory formula method may be used to calculate the fringe benefit.

If the vehicle is not a car, the benefit is treated as residual fringe benefit and either the operating cost or cents per kilometre (vehicle other than a car) methods may be chosen.

Note that under the operating cost method, without a log book, the private use percentage is deemed to be 100%.

See further notes: Eligibility Criteria – ATO

Reducing the value of private use

The FBT calculated private use value can be reduced, by contributions from the employee. How such contributions are handled can also have GST consequences which must be taken into account.

Private use is measured on a daily basis throughout the year. So an employee’s private use valuation of a provided vehicle can be minimised by ensuring as much as possible at times in which the vehicle is idle, that the vehicle is not available for private use, and therefore not counted as such. For example: arranging for the employer to retain possession and/or custody of the vehicle during times spent travelling.

See also:

This page was last modified 2021-05-26