Traders face paying back their bosses thousands of dollars a year under new Australian Taxation Office rules regarding UTEs.
The popularity of UTES has sparked a crackdown by the Australian Taxation Office that could cost businesses thousands of dollars a year – and force traders to pay back their bosses the extra tax.
Dual-cab vehicles such as the Toyota Hilux and Ford Ranger – Australia’s two best-selling cars – could be subject to Fringe Benefits Tax (FBT).
Businesses, such as those in the construction sector, can currently claim an FBT exemption if a car is purchased and provided to an employee in the course of their work.
But this only applies if private use is limited, such as traveling to and from work, and the tax office suspects that many people use the vehicles both for work and as a personal car.
The ATO said: “If an employee’s use of a dual-cab vehicle does not meet the conditions for limited private use, it is a car benefit, or residual benefit , and FBT applies. »
The Toyota Hilux (pictured) is Australia’s best-selling car and the ATO is tackling a tax loophole that allows construction companies to avoid paying tax on employee benefits.
“If you or your employees drive to work to attend football games on weekends, tow the boat to go fishing on Sundays, or go camping, chances are you will go beyond the definition of a “ limited private use.
The amount of tax payable could be several thousand dollars per year.
“If vehicles deemed to be exempt are subsequently deemed by the ATO to be non-exempt, any resulting FBT will be payable by the employer,” tax firm Pitcher Partners said. GoAutoNews.
If employees such as tradespeople use the car they provided privately and the company is charged the extra tax, they may have to personally reimburse their bosses, Pitcher Partners said.
“It may be prudent for employment contracts to provide allowances for the employee to reimburse any FBT costs to the employer in the event that unauthorized private use of the vehicle results in it not meeting the requirements relating to exempt vehicles.”
According to accountant William Buck, the fringe benefits tax only applies to employees who have a vehicle as part of their job.
“The guidelines currently only consider FBT (i.e. an employer providing UTE to an employee) and not other arrangements where a UTE or van is used (such as a sole trader or an employee who uses their own ute for business purposes).”
If the UTE is used for weekend trips or exceeds 750 km per year during private trips, then the tax applies.
TAX RULES ON SOCIAL BENEFITS FOR DOUBLE CAB UTES
To benefit from the exemption:
The vehicle must be designed to tow a load of one tonne or more.
Shall not be designed for the primary purpose of carrying passengers.
Private use must be limited, minor and infrequent.
The value must be below the $76,950 threshold for luxury cars.
Completely private travel cannot exceed 750 km per year (i.e. travel to and from work is not taken into account).
If the car is used as both a work vehicle and a private vehicle, FBT must be applied.