Tradies face reimbursing their bosses thousands of dollars a year under new Australian Tax Office rules about utes

The popularity of utes has led to a crackdown from the Australian Taxation Office, which could cost companies thousands of dollars a year – and force tradies to pay back the extra tax to their bosses.

Double taxis such as the Toyota Hilux and Ford Ranger – the two best-selling cars in Australia – may be subject to Fringe Benefits Tax (FBT).

Businesses, such as construction companies, can currently claim an FBT exemption if a car is purchased and made available to an employee as part of their job.

But this only applies if private use is limited, such as commuting, and the Tax Authorities suspect that many people use the car both for work and as a private car.

The ATO said: ‘If an employee’s use of a double taxi does not meet the conditions of limited private use, a car allowance, or residual allowance, applies and FBT applies.’

‘If you or your employees take work to football games on the weekend, tow the boat to go fishing on Sundays or go on camping trips, chances are you go beyond the definition of ‘limited private use’.

The amount of tax payable can amount to thousands of dollars per year.

“If vehicles treated as exempt are subsequently determined by the ATO to be not exempt, the resulting FBT will have to be paid by the employer,” tax firm Pitcher Partners told us. GoAutoNews.

If employees like tradies use the provided car privately and the company is billed for the additional tax, they may have to personally reimburse their bosses, according to Pitcher Partners.

‘It may be prudent to make allowances in employment contracts 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 exempt vehicle requirements.’

According to accountants William Buck, the fringe benefits tax only applies to employees who have a car as part of their work.

‘The guidance currently only takes into account FBT (i.e. an employer providing the car to an employee) and not other arrangements involving the use of a car or van (such as a sole trader or an employee using their own car for work purposes).”