“Ute” refers to a utility vehicle or pickup truck that typically combines the features of a sedan or station wagon with a cargo tray at the rear. A dual cab provides seating for both passengers and a driver.
In a commercial sense, utes are extremely popular among tradies and goods trading as there’s considerable space for tools, packages, and materials.
Given the complexity of fringe benefits tax (FBT), dual cab utes commonly go under the radar, hurling businesses towards thousands of dollars in unplanned tax. Keep reading as we debunk several misconceptions and outline FBT infringements you should know about.
Should You Pay FBT For Dual Ute Usage?
There’s a common misconception that providing employees utes exempts them from FBT, irrespective of the type (single or dual) and how often they use them for private reasons. As a result, dual cab ute sales rocketed, with nearly 15% of new car sales between 2013 and 2022 belonging to these vehicles.
The Australian Taxation Office considers FBT-worthy “cars” as sedans, panel vans, utes, and station wagons–ultimately, any vehicle that can carry eight passengers or fewer.
The ATO is cracking down on FBT for these commercial-style vehicles due to the blurred lines between personal and work-related travel.
Does FBT Exemption Apply?
The ATO can overlook private use of dual cab, leaving you exempt from FBT, provided you fit the following criteria:
- Employees privately use the dual cab for limited travel between home and work, perform work-related duties, and minor, infrequent, irregular professional use.
- The dual cab isn’t designed for passenger transport and is primarily used for commercial purposes.
Since dual cabs are often designed for passengers, determining exemption can take complex calculations. For instance, if a dual cab exceeds a certain distance, it could be FBT liable.
Can You Mitigate FBT?
The most efficient way to remain FBT compliant while mitigating costs is to use the vehicle solely for work-related tasks. Alternatively, you could declare minor, infrequent, and irregular non-work-related travel. The ATO measures this as:
- 2 km detour between your residency and workplace
- Total of 1000 km worth of diversions between 1st April and 31st March
- No single diversion across the FBT year can exceed 200 km
You can also adjust your vehicle policy to follow the latest Practical Compliance Guideline (PCG) closely. Ensure employees sign the declaration and retain logs of minor and infrequent use.