Could bushfire relief volunteering stretch the ‘private use’ FBT exemption rules?

We all know about the devastating bushfires that have caused massive destruction across the country. And we’re also starting to hear about the relief efforts being put in place by the government in the form of aid to affected regions and other measures.

Even the ATO has come to the rescue, and has announced that income tax, activity statement, SMSF and FBT lodgements and their associated payments will be deferred until 28 May. The ATO will also fast track refunds that are due to affected taxpayers, and remit any interest and penalties applied to affected taxpayers’ tax debts since the start of the bushfires.

However Tax & Super member and experienced tax adviser David Krunic, principal of DKP & Co Chartered Accountants, has pointed out one tax measure that has the potential to trip-up many well-intentioned Australians who may be looking to do what they can to help those affected by the recent disasters — this could include many tradies, for example.

A practical compliance guideline on the FBT rules was issued relatively recently regarding the private use of vehicles, and staying within the bounds of exempt car benefits and exempt residual benefits. PCG 2018/3 tweaks the ATO approach that applies to determine if private use of a vehicle is limited for the purposes of the car-related exemptions.

Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of its employee. However the car-related exemptions under the FBT rules allowed a fringe benefit to be an exempt benefit where the private use of eligible vehicles by current employees during an FBT year is limited to work-related travel, and other private use that is “minor, infrequent and irregular”.

The PCG worked to more finely define what “private use” was, and drew a line in the private purpose sand at 1,000 kilometres in total in an FBT year, or a return journey of more than 200 kilometres from a diversion.

David Krunic points out that where an employee wishes to travel to an affected zone without express instruction from their employer (for example, outside work hours), this could very well fall outside the 1,000 kilometre limit set in PCG 2018/3. “Clarity from the ATO is required in these situations,” he says.

“Further, the limits of otherwise deductible rules and business use rules can be stretched when travelling to disaster zones. Legislative reform to the FBT and ITAA provisions appear warranted to ensure that adverse tax outcomes are not triggered in these situations.”

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