One of the most common tax planning strategies of owning a ute has had an overhaul by the ATO. Unsurprisingly, this guideline is now more complicated than it used to be.
Previously a business could provide a ute to employees and the general rule of thumb was that it was tax deductible and there was no need to calculate Fringe Benefits Tax, provided the private use by the employee was minor, infrequent and irregular …… with no firm definition as to what “minor, infrequent and irregular” was.
The ATO have now issued some firm guidelines as to when utes (and other eligible vehicles) will be exempt from Fringe Benefits Tax. This will only apply if:
- When using the vehicle between home and work, any diversion adds no more than 2km to the ordinary length of that trip
- The private use is less than 1,000km for the entire year
- No single return journey for private purposes can be more than 200km
- The cost of the car was less than the Luxury Car Tax Threshold when it was acquired (currently $66,331).
Be mindful that the term “ute” does not automatically include dual cabs. As there is no longer a list of eligible vehicles, dual cabs and four-wheel drives need to be considered under the Miscellaneous Taxation Ruling MT2024.
This applies from 1st April 2018.
What should you do?
If you satisfy the requirements for the amount of private travel, then the employee will need to sign a declaration each year to confirm that the requirements for private use have not been exceeded.
If you don’t, then Fringe Benefits Tax will need to be considered. The impact may be able to be reduced through completing a logbook to document the business use percentage of the vehicle.
If you have any queries please do not hesitate to contact us!
The Full Bench of the Fair Work Commission has today determined to increase the National Minimum Wage by 3.5%, and for the same increase to be applied to the minimum rates in each Modern Award. The Full Bench was very positive in its statement about its view on the economic outlook for Australia, stating:
“Compared to the position at the time of the 2016–17 Review, the economic indicators now point more unequivocally to a healthy national economy and labour market. The recent data has shown strong growth in full-time employment together with a high participation rate.”
 The Panel remained of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation. Recent Australian research published by the RBA (the Bishop paper), discussed in Chapter 2 of the Decision provides support for that view. Recent research in the UK continues to support that conclusion. The position is more contested in the US.
 The real value of the NMW has increased by 5.8 per cent over the last decade, and by 4.3 per cent in the past five years. However, the Panel noted that this has not resulted in improvements to the actual or relative living standards for many categories of NMW and award-reliant households, due to changes in the tax-transfer system. It has, however, provided an increase in the living standards of single adults.
The effect of the increase will mean that the National Minimum Wage will increase by $24.30 per week, from the current $694.90 per week ($18.29 per hour) to $719.20 per week ($18.93 per hour).
The 3.5% increase will take effect from 1 July 2018.
Employers should ensure that where the Modern Award rate is being paid, the increase is passed on to their Award-covered employees from 1 July 2018. It is also essential that Employers review pay rates for employees currently receiving over-Award payments, or engaged under Enterprise Agreements, to ensure that they do not underpay their employees when compared against the revised award rates, and/or continue to comply with the remuneration provisions of the Enterprise Agreement.
Aitken Legal can be contacted for any enquiry about the wage increase as it affects remuneration arrangements, including through Modern Awards and Enterprise Agreements.
Written by Aitken Legal
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