Where an employer pays/reimburses an employee’s road toll expenditure or allows the employee to use the employer’s electronic road toll tag, a fringe benefit may arise, depending on the particular usage of the vehicle.
Payment/reimbursement of an employee’s road toll expenses is prima facie an expense payment fringe benefit. Use by an employee of an employer’s electronic road toll tag would constitute a residual benefit.
In both cases, a fringe benefit arises, and it is necessary therefore to determine whether an FBT liability exists.
Business trips
Road tolls incurred solely on business trips are otherwise deductible and are not subject to FBT.
The ATO accepts that an employer does not need to have employee declaration where the road tolls are incurred solely for business purposes and the employer owns or leases the vehicle.
Where the employer has an enforced policy that restricts the private use of employer cars, the employer can take those restrictions into account when determining whether road tolls are incurred for business purposes. Records, such as a logbook or diary records, that substantiate the extent to which the benefit provided would have been ‘otherwise deductible’ to the employee must be maintained.
Other Exemptions
Minor benefits?
If the value of the road toll is less than $300 and it would be unreasonable to treat the benefit as a fringe benefit, the minor benefits exemption (section 58P) will apply. The following example is taken from the ATO’s website:
‘Example 1: Minor benefits exemption applies to road tolls
You let your employee use a pool car to travel to and from work on an ad-hoc basis during the FBT year. Your employee travels on a toll road on the way to and from work. An electronic toll tag (where the account is held in your name) is attached to the car and records all road toll expenditure for that car. Your employee takes the car home overnight 10 times during the FBT year (which is 20 tolls). The cost of each toll is $5.40 including GST.
Each road toll recorded when your employee used the car for a private purpose is a residual benefit. However, the minor benefits exemption would apply to each residual benefit provided to the employee.
If your employee started using the pool car to travel more frequently on the toll roads, the minor benefits exemption may no longer apply, and the road tolls would be a residual fringe benefit with a taxable value that would not be reduced by the otherwise deductible rule.’
‘Workhorse’ vehicles?
When an exempt vehicle (for example, a panel van or a utility truck) is not salary packaged, the Commissioner will accept that any road toll benefits you provide will not be subject to FBT. This is because exempt vehicles are generally provided for work travel of the employee and any private use is minor, infrequent and irregular. Any associated benefits such as road tolls would be considered to be for business purposes and otherwise deductible.
Where an exempt vehicle is provided under a salary packaging arrangement, FBT would be payable on any road toll benefits that relate to private travel unless another exemption or concession applies. Salary packaged vehicles are generally used for private purposes in excess of the limitations on private use for an exempt vehicle. The provision of road toll benefits will not be subject to FBT where provided in relation to salary packaged exempt vehicles that meet the limited private usage requirement or where another exemption or concession applies. This maintains equity with other salary packaged vehicles which are not exempt under the FBT law.
Where the otherwise deductible rule or an exemption is not available – how to value the benefit?
The ATO suggest the following valuation options:
Actual value
The taxable value of road toll benefits is the amount that you pay for each road toll. You can use evidence such as receipts, electronic tag records, running sheets and employee attendance records to support your calculation.
Private use percentage – diary records
Where you keep a diary or similar record of road toll usage over a four-week representative period which establishes the business and private usage of road tolls over that period, the private use percentage can be applied to road tolls for the entire FBT year.
Private use percentage – other records
You can use records such as car logbooks, odometer records and running sheets to record car travel and establish the business and private use of the car in an FBT year. You can apply the percentage of private usage established for an FBT year using these records to your total road tolls expenditure for the year. Logbooks which comply with the car fringe benefit operating cost method may only need to be completed every five years.
Employee’s usual road toll expenditure
You can determine the employee’s usual private road toll expenditure in a normal working week and apply this to the employee’s working year. You can use evidence such as electronic tag records, running sheets and employee attendance records to support your calculation.
We trust the above summary is not ‘a bridge too far’ for our members.
For further details on the ATO’s approach, including record keeping requirements relating to the above valuation options, please refer to the ATO website at Fringe benefits tax and road tolls.