Utes and FBT Exemption $$

[LSX-438]

This topic has come up elsewhere but I need clarification.

When Joe Bloggs office worker packages a car (salary sacrafice), there is usually an FBT hit linked to the distance travelled.

The theory is :

Higher number of k's = higher implied business use = less FBT.

However some who package their car do not actually use it for business purposes, and may not even drive it to work. I believe there is provision for packaging a car for your spouse too.

FBT Exempt?

Apparently certain cars are FBT exempt (eg. a Ute).

There is some confusion about what FBT Exempt means. Some say it relates to vehicle payload (ie must be 1-tonner) whereas others say any Ute is ok. There is the notion that any car designed to carry a load versus carrying passengers is exempt. Someone here has mentioned their Maloo R8 is exempt.

I have spoken with my salary packaging people who rolled out the "1-tonne" rule straight away.. In addition they stipulate you can only claim FBT exemption (for Utes) where:

the utility is used for primarily work purposes, where you are a tradesman who requires to carry equipment with him in the course of fulfilling duties etc. etc.

So I have 2 questions:

1. What is the definition of an FBT exempt vehicle

2. Can Joe Bloggs office worker (not a tradesman) take advantage of FBT exempt vehicle?

I intend on contacting the Tax office and/or an accountant, but I thought someone here may have recently determined (definitive) answers, perhaps by talking to the tax office. This really needs to be answered with certainty because there is a potentially huge benefit available.

thanks

[MalooR8]

Doesn't it annoy you when they do that with the 1 tonne thing.....

If you go here

It won't let me link directly but you need Tax ruling MT2024 and its addendum MT2024A

The addendum says that a series III V8 Holden ute is exempt, Latest version has a larger ute tray and no larger payload. Wave this at em....


The tax Ruling MT2024 in the first paragraph states:

Generally speaking, a liability for FBT arises where an employer's motor vehicle is used by an employee for private purposes or is available for the private use of an employee. However, under sub-sections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act ("the Act"), a liability for FBT will not arise where the private use of certain vehicles by employees during a particular year of tax is limited to certain work-related travel. Work-related travel is defined in sub-section 136(1) of the Act to be travel between the employee's residence and place of employment or other place at which employment duties are performed and any travel that is incidental to travel in the course of performing duties of employment.


So if you drive to work and back its ok. I emailed the tax office for a ruling and was told this is a very common question, so much so they don't do rulings on it, its just OK. I've the persons details at home if you need to contact them. If you talk to an accountant talk to one who deals with tradesmen the two I chatted to (ones my wife) wouldn't know a tradesman apart from paying them to do work at home, they had no clue on the rulings, however their now much enlightened.

[LSX-438]

thanks MalooR8 - that is excellent.

If you can provide those details it would be awsome.

So you are saying Joe Bloggs office worker can definitely package a utility and get FBT exempt benefits?

[MalooR8]

try these links (got em working):

here


and here

You've definately no problems with the 1 tonne ruling, although Holdens got problems with the cross 4 if its not 1 tonne, Your only hurdle is getting the beancounters at your work to accept it. Worth pursuing though

[LSX-438]

thanks for that.

fwiw, this is what my packaging people said of the matter:

There are two separate issues to look into.

1. Unless the utility is used for primarily work purposes, it is excluded from being FBT exempt. In your case, unless you are a tradesman who requires to carry his equipment with him in the course of fulfilling his duties, or say someone working in production within the media industry who needs to carry around amplifiers, speakers etc. in line of his work, your utility will not be FBT exempt.

2. Once the above has been resolved, we can proceed to ascertain the treatment of the utility either as a car fringe benefit (if less than one tonne), or a residual benefit (if greater than 1 tonne).

Anyway - If you still have the contact details of the tax office person, that would be great.

[MalooR8]

you have mail

[LSX-438]

thanks for all your help on this MalooR8, i will let you know the outcome.

[delftssute]

So for the dummies, does that mean that if you package a ute (<1 ton ) on a novated lease should you pay the reduced rate based on KM's travelled or pay no FBT at all.

the rates based on KM's travelled are as follows:

The formula for FBT per year is: (Capital cost of vehicle) x (percentage determined by kms achieved) x .485 x 2.1292.
The percentage is determined by the number of kilometres driven. Under 15,000 = 26%, between 15,000 and 24,999 = 20%, between 25,000 and 40,000km = 11%, over 40,000km = 7%.
FBT is not payable on lease payments or running costs

[sandmanls1]

couple of people here have got Rodeo 4wd dual cab v6 utes over Commodores even though intial purchase price is more, costs less over the time of the vehicle due to being fbt exempt..

[LSX-438]

Originally posted by sandmanls1
couple of people here have got Rodeo 4wd dual cab v6 utes over Commodores even though intial purchase price is more, costs less over the time of the vehicle due to being fbt exempt..

If they are claiming their exemption under ruling MT2024 then they may have made a huge compromise for nothing.

The addendum to that ruling lists all elegible (FBT Exempt) vehicles.. the V8 Commodore Ute is one of them.

[LSX-438]

i've fired off the questions to the ATO.

My packaging people have indicated that probably still wont do it; i wonder if they are really allowed to refuse.

[AndyP]

I always thought dual cab werent FBT exempt? They never used to be...

[sandmanls1]

oops meant single anyp dunno where got dual from...

[LSX-438]

Originally posted by AndyP
I always thought dual cab werent FBT exempt? They never used to be...

me too... it seems there are many misconceptions when it comes to this FBT exempt thing. Problems is even the accountants dont know the law properly.

[Brendan]

Originally posted by forrestd
me too... it seems there are many misconceptions when it comes to this FBT exempt thing. Problems is even the accountants dont know the law properly.

Problem is the Australian tax system is unwieldy and overly complicated.

Needs to be simplified, piss all the deductions and claims off, top tax rate of 30-33% - I'd be a hell of a lot happier.

Remember at the end of the year, that big cheque you get back from the ATO is the very reason you are paying nearly half your cash to the ATO during the year.