Are you aware of the current ute ATO crackdown?

Are you aware of the current UTE ATO crackdown?

Have you noticed the number of UTEs around these days? 

Well, so has the Australian Taxation Office (ATO), especially in Sydney, where dual ute cabs, such as Ford Rangers and Toyota Hiluxs, are now the most popular cars on the road. 

Unfortunately, this awareness has led to them cracking down on tradies wrongly not paying fringe benefits tax for their vehicles. 

Because of this, if you or your employees own a work UTE, you need to make sure you’re following the rules to avoid a knock on the door. Read on for our advice. 

The UTE tax deduction rules

First, let’s quickly recap what those rules are.

If you provide dual utility vehicles (an eligible vehicle) to employees as a fringe benefit, you’re not required to pay fringe benefits tax if the car is used for:

• Travel between home and work 
• Travel that’s incidental to travel in the course of employment duties 
• Non-work-related use that is minor, infrequent and irregular (such as occasional use of the vehicle to remove domestic rubbish)

If FBT doesn’t apply to use, it also doesn’t apply to road or bridge tolls clocked while your employee was using the vehicle. Or if it’s used by a business associate (such as a partner) as long as their use is minor, infrequent and irregular. 

However, FBT exemption is void if your employees use their UTEs as their personal or family cars or for regular leisure activities outside of working hours.

We know it’s hard to deny the work/play flexibility of UTEs, but from a tax perspective, using them for pleasure is a no. 

Related: Are you meeting your fringe benefits tax obligations?

Consequences for letting personal use slide

If you fail to put in appropriate measures to stop your employees from using their UTEs outside of these rules, you could face the following:

• Penalties and interest charges
• A reassessment of previous tax returns leading to you having to make a back payment of taxes
• An ATO audit to assess your overall tax compliance
• Legal consequences, such as fines and court proceedings
• Reputational damage

If the ATO catches you out, in some cases, they may give you an opportunity to take corrective action by voluntarily disclosing errors or emissions. This might help mitigate the consequences. 

How to stay UTE FBT safe

If you suspect you may be breaking the rules or just want to ensure you don’t in the future, we advise you to take action now. 

This means informing your employees on the appropriate use of their work vehicles by sending an email or calling a meeting. And, importantly, ensuring you have policies in place that enforce the rules. 

By getting everyone on the same page, you can avoid the ATO cracking down on you and continue to save on tax each year. 

We also urge you to be mindful that UTEs aren’t the only thing facing greater scrutiny. So make sure you cross the i’s and dot the t’s on all of your fringe benefits.

If you’re concerned with your compliance to the rules, reach out to your Maxim advisor or get in touch with our team.