Business owners who make a car (leased or owned) available for employees to use for private travel may be subject to fringe benefits tax (FBT).
If a car is garaged at or near your employee’s home, even if only for security reasons, it is considered by the ATO to be available for their private use regardless of whether or not they have permission to use the car privately.
Similarly, where the place of residence and employment are the same, the car is considered as private use. Generally, travel to and from work is also private use of a vehicle.
The use of the car is exempt from FBT in some circumstances, i.e an employee’s private use of a taxi, panel van or utility designed to carry less than one tonne if the travel is limited to:
– travel between home and work
– incidental travel in the course of performing employment-related travel
– non-work-related use that is minor, infrequent and irregular
The best way to show the ATO that a car is used for business purposes is by keeping a log book for a period of at least 12 consecutive weeks showing:
– dates of travel
– odometer readings at the start and end of any trips
– the kilometres travelled
– the reason for the trip
Business owners should also keep odometer readings at the start and end of each year, along with details of the operating costs of the car.
Note, company directors are generally considered as employees by the Tax Office, so if directors use the car for private purposes, then FBT could apply.
