Cars and Fringe Benefit Tax
When is Fringe Benefit Tax (FBT) applicable?
Fringe benefit tax arises where an employer makes a car that they own or lease available to an employee for their private use.
What determines ‘Private Use’ for an employee?
A car is taken to be available for the private use of an employee on any day that they or their associates:
- Use it for private purposes
- Could use it for private purposes
If a car is garaged at, or near, an employee’s home, it is taken to be available for the employee’s private use, regardless of whether or not the employee has permission to use the car privately.
Where the place of employment and residence are the same, the car is taken to be available for the use of the employee.
As a general rule, travel to and from work is private use of a vehicle.
When are car benefits exempt from FBT?
There are some circumstances where car benefits are exempt from FBT – for example, an employee’s private use of a taxi, panel van or utility designed to carry less than one tonne, is exempt from FBT if their private use is limited to:
- Travel between home and work
- Travel incidental to travel in the course of performing employment-related travel
- Non-work-related use that is minor, infrequent and irregular (eg occasional use of the vehicle to remove domestic rubbish)
What is the best way to calculate the taxable value of a car fringe benefit?
There are 2 available methods to calculating the taxable value of the benefit:
1. Statutory method – based on the car’s cost price
This FBT method is based on how much the vehicle costs rather than how much it is being used privately. It uses a flat rate of 20% of the car’s base value, taking into account the number of days per year the vehicle is available for private use.
The base value is the car’s purchase price, less stamp duty and any registration costs incurred as part of the purchase.
The number of days available for private use is also taken into account.
2. Operating cost method – based on the costs of operating the car
This method is also referred to as “the logbook method” as it requires a logbook to be used to record how much each vehicle is used for work and private use.
This method can provide a lower taxable value when the employee uses their car regularly for work purposes.
The logbook must be maintained for a period of 12 consecutive weeks and record the detail of:
- The purpose of each trip
- How many kilometres were travelled during each trip
- Whether the journey was work related or private
The logbook is then valid for the next 5 years, provided there is no meaningful change in the business pattern of use, or the ATO can request a new logbook be recorded.
To calculate the tax, the car’s private use percentage is multiplied by the car’s actual running costs (fuel, rego, insurance, repairs), as well as leasing costs, depreciation and interest costs for the year.
Our top 5 best car logbook apps, designed for Aussies, and compliant with ATO requirements are:
- GOFAR ATO-compliant logbook app
- Vehicle logger
- Driversnote app
- ATO logbook
- Driver direct logbook
If you have any questions regarding your Business and/or its finances, contact us today and one of our friendly team will happily assist.
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