If you hand an employee the keys to a work car or ute, the ATO wants you to know that fringe benefits tax (FBT) may apply, and it has been publishing reminders for employers as the FBT year heads towards its 31 March end.

Home garaging counts

The ATO's guidance says a car garaged at or near an employee's home is treated as available for private use, even if the reason is only security. FBT can apply whether or not the employee has your permission to use the car privately. Some vehicles may be exempt, so the type of vehicle matters, but it is a mistake to assume that a work ute is automatically free of FBT.

Records are needed either way

The ATO says employers must keep accurate records of work cars whether or not staff use them privately. That includes situations where you think there is no FBT liability or you are not required to lodge an FBT return. The records are what let you support your position if the ATO asks. The ATO also says that using a third party to manage your fleet does not move the responsibility away from you.

Logbooks must be complete

If you use the operating cost method to reduce the taxable value of a car benefit, the ATO says you need a logbook covering a continuous 12 week period, plus odometer records of the total kilometres travelled in the year. A logbook stays valid for five years, though you can start a new one at any time.

Each business journey needs the start and end dates, odometer readings at the start and end, kilometres travelled and the purpose. The ATO flags that simply writing "business" is not enough detail. In one ATO example, logbooks that were missing the required details were invalid, so the statutory formula method was used instead to work out the taxable value.

What to do

  • List every vehicle your business owns or leases and note who has the keys.
  • Ask where each one is parked overnight. If it is at an employee's home, treat private use as a live question.
  • Check your logbooks. Are the dates, odometer readings and journey purposes complete?
  • Record odometer readings at the start and end of the FBT year.
  • Keep the paperwork together: purchase or lease documents, running costs and fleet manager reports.
  • Ask your accountant before 31 March if you are unsure whether a vehicle is exempt.

A few minutes spent now is far easier than rebuilding records after the FBT year has closed.

This article is general information only and does not take your circumstances into account. Check the ATO website or speak to a registered tax professional about your situation.