• 7.6 Exempt car benefits

    There are circumstances in which private use of a car by a current employee may be exempt from FBT.

    An employee's private use of either:

    • a taxi, panel van or a utility designed to carry less than one tonne
    • any other road vehicle designed to carry a load of less than one tonne (that is, a vehicle not designed principally to carry passengers) is exempt if the employee's private use of such a vehicle is limited to  
      • travel between home and work
      • travel incidental to travel in the course of performing employment-related duties, and
      • non-work-related use that is minor, infrequent and irregular (for example, occasional use of the vehicle to remove domestic rubbish).

    Where the vehicle is designed to carry one tonne or more, you may be eligible for an exemption under the motor vehicles - residual fringe benefits exemption.

    Example: Exempt use

    • An electrical company employee takes the company van (carrying capacity of less than one tonne) home each night as there is no security at the company premises. The only non-work-related use during the FBT year was a trip to pick up some furniture and take it to the employee's home. This use of the van would be exempt from FBT.
    • If the use of the vehicle exceeds the limits set out above, it is a car fringe benefit. All the private use of the vehicle, including the travel between home and work, is taken into account in determining the business percentage under the operating cost method. If no logbook records are maintained, the statutory formula method must be used to value the car fringe benefit.
    • Where the vehicle is not a car as defined in section 7.1, a residual benefit arises - for more information, refer to section 18.6 of Residual fringe benefits.

    Example: Non-exempt use

    • A council employee takes a utility (carrying capacity of less than one tonne) home each night and on the weekends. Although the utility is clearly marked as a council vehicle, the employee uses it for shopping and other private purposes during the week and often for country trips on the weekends.
    • This use of the utility would not be exempt from FBT and would be treated as a car fringe benefit. Assuming there are no logbook records, the taxable value of the utility would be calculated using the statutory formula method.
    • Dual cab vehicles
    • Dual cab vehicles are variants of conventional goods vehicles with additional seating positions behind the driver and front passenger seats. They share a common chassis, to which the single or dual passenger cab and alternative tray sections may be fitted.
    • Dual cabs qualify for the work-related use exemption only if one of the following applies:
    • they are designed to carry a load of one tonne or more, or more than eight passengers
    • while having a designed load capacity of less than one tonne, they are not designed for the principal purpose of carrying passengers.

    A dual cab that has a designed load-carrying capacity of less than one tonne may qualify for the work-related use exemption only if the vehicle is not designed for the principal purpose of carrying passengers. To determine whether the majority of the designed load capacity is attributable to passenger-carrying capacity, multiply the designed seating capacity (including the driver's seat) by 68 kilograms, which is the figure used for applying the Australian Design Rules. If the total passenger weight so determined exceeds the remaining 'load' capacity, the vehicle is treated as being designed for the principal purpose of carrying passengers and is ineligible for the work-related use exemption.

    Example: Dual cab vehicles

    A dual cab vehicle with a gross vehicle weight of 1,950 kilograms, a basic kerb weight of 1,400 kilograms and a designed seating capacity of five would be considered a vehicle designed principally for carrying passengers. This is because the majority of the total load capacity (340 kg (5 × 68 kg) of a total of 550 kg) would be absorbed by its designed passenger-carrying capacity.

    End of example

    Modified cars

    In limited circumstances, modified vehicles originally designed as passenger cars may be eligible for an exemption from FBT that is available for vehicles not designed for the principal purpose of carrying passengers.

    Generally, the exemption applies only where modifications permanently change a car and cannot be readily reversed for the car to be regularly used alternately as a passenger or non-passenger car, if required. A clear example of this would be the process involved in producing hearses, where a station wagon body is extended, the rear doors removed, flush panelling fitted and the compartment behind the driver's seat suitably modified.

    Unregistered vehicles

    If a car is unregistered for the full FBT year and used principally for business purposes, any private use is exempt from FBT. A car that may be lawfully driven on a public road is regarded as being registered.

    Personal services entities

    A car benefit is an exempt benefit in relation to an FBT year if the person providing the benefit cannot deduct an amount under the Income Tax Assessment Act 1997 (ITAA 1997) for providing the benefit because of section 86-60 of that Act.

    Section 86-60 of the ITAA 1997 limits the extent to which a personal services entity can deduct car expenses. Deductions are not allowed for more than one car for private use.

    The use of these cars is an exempt benefit because the entity is not entitled to claim an income tax deduction for these cars.

      Last modified: 15 May 2017QC 17818