Why ATO tax rules on company vehicle expenses could soon change

From our Australia office

The way that company vehicle expenses are taxed could be about to change.

The ATO (Australian Taxation Office) is reviewing FBT (Fringe Benefits Tax) exemptions for certain types of commercial vehicles. They say this is in response to “unusually high work-related expense claims”.

The current system allows company vehicles such as work utes, and anything ‘not designed primarily to carry passengers’, to be used for ‘minor, infrequent and irregular’ personal use.

But the ATO has been looking to tighten up these rules by introducing much more specific criteria to identify the kind of personal usage that will qualify for tax relief. The proposals are for:

  • Any diversion to the normal trip between home and work which adds less than two kilometres.
  • No more than 750 kilometres of personal usage in each FBT year.
  • No single private journey to exceed 200 kilometres.

For finance teams, it means that company vehicles which currently qualify for the exemption could be set to lose their status with related expenses incurring FBT costs.

In light of the proposals, tax experts are advising companies to start reviewing the way that their commercial vehicles are being used to avoid getting caught out by any future ATO changes.

A public consultation on the draft proposals has recently ended with any tax changes likely to be announced later in the year.

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