The ATO has plans to relax the rules for the private use of work utes in the lead up to their blitz on Fringe Benefits Tax non-compliance.
Existing rules allow utes to only be used for ‘minor, infrequent and irregular’ journeys without incurring Fringe Benefits Tax. At the moment these journeys can include the occasional use of the vehicle to remove domestic rubbish.
The draft compliance guidelines allow for more leeway for the private use of utes including a ruling to allow for up to 750km a year of non-work travel and a diversion of up to 2km during the journey to and from work. Under these guidelines, no return journey for wholly private purposes must exceed 200kms.
Unreasonably unrealistic rules in the past have not deterred taxpayers from using their work utes for private uses. Hence, the ATO have drafted this ruling with the idea that more realistic rules could encourage compliance.
The use of an ordinary sedan or SUV that is supplied by an employer with the intention the employee will use it to travel to and from work is a fringe benefit, and therefore incurs tax. However, utes that meet a certain criteria are exempt, meaning they are able to be provided as a tax-free perk. Though they are also able to carry passengers, utes are primarily designed to carry a load, and as such they fall into this category. Ultimately it is an employer’s obligation to ensure the private use of work utes doesn’t occur.