“Fair use”: personal use of company vehicles – how much is too much?

Company Car Fair Use

Use of a company car is often perceived as a major perk for employees, negating the need to own their own vehicle and saving them thousands per year. Companies who want to attract and retain the best and brightest may offer incentives such as a company vehicle as an attractive part of salary packaging.  And for others it is an essential requirement of their day to day roles on the road.

Company vehicles kept at an employee’s home will naturally be used for personal trips, with the personal component attracting Fringe Benefits Tax (FBT). The ATO themselves recognise that ‘minor, infrequent and irregular‘ personal trips should be FBT exempt as an inevitable part of an employee benefit package.

In line with this, many organisations have a “fair use” policy that is often essentially trust based and means the employee can use the vehicle for personal use as long as they don’t go overboard.

The issues arise when what is understood as fair or compliant usage of a company vehicle differs greatly between the employee and the employer.  This isn’t always the employees fault. If employer expectations and compliance issues are poorly communicated to them – or not communicated at all – then organisations leave themselves wide open to either abuse or misunderstandings.

For example, from an FBT perspective, the ATO currently stipulates that commuting to and from work is classed as personal use*, but yet many employees are either unaware of this or they simply claim it anyway.

Then there’s the cost to your bottom line.  If your company policy stipulates that fair use of the vehicle is, for example, 5% of personal use how are you monitoring that?  An internal audit using eLogbook, paper logbooks or similar will enable you to find the answers.

“We have had customers who believed their employees’ fair personal use was around 5-10% and were shocked to find it was actually 45%.  Whatever the size of your fleet, that can end up being a significant cost to your business.” 

Darren Playle, GM, GPSi Group

It’s critical to have clear internal policies about what is acceptable use in your organisation and what is not.  Ensure these policies are communicated when on-boarding new staff, and refresh expectations to your people at the beginning of every financial year.

Telematics can make life easier for you to track costs. Using eLogbook is a seamless process for your employees to record mileage and purpose of trip through an easy-to-use app.  Even the most technophobic employee will find it easy! (Take a look at our simple and short video tutorials).

Company car usage can be an important part of your overall employee value proposition, particularly in a marketplace where it can be increasingly difficult to attract and retain quality performers.  That does, however, require weighing up against unsustainable costs to the business in fleet management.

Fairness and communicating clear expectations are imperative in order to get the balance right between an engaged and valued workforce, and ensuring a strong bottom line that benefits everyone.

If you’d like to make efficiencies in your fleet, we have a number of cost-effective solutions – or we can show you how to optimise your existing solutions – call us on 1300 GET GPS (438 477) or email us.


* (Although FBT guidelines may change in the next financial year, as the ATO have issued new draft guidelines on determining private use of company vehicles. These are not yet finalised).

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