What is a Car Fringe Benefit?
A car fringe benefit commonly arises when an employer makes a car they own or lease available for the private use of an employee. If you conduct your business through a company or trust, you may be an employee of the company or a trust.
A car is made available for private use by an employee on any day the car:
- is used for private purposes by the employee or associate
- is not at your premises, and the employee is permitted to use it for private purposes
- is garaged at their place of residence, regardless of whether they have permission to use it privately
Calculating the Taxable Value
You can calculate the taxable value of a car fringe benefit using either a statutory formula or operating cost method.
STATUTORY FORMULA METHOD
Base Value. If you’ve owned the car for less than 4 years when the FBT year began, the base value is the original cost price of the car, or 2⁄3 of the cost price if owned for more than 4 years.
Cost price. The original purchase including GST and luxury car tax but excluding, stamp duty, registration, acquisition costs such as delivery and non-business accessories like paint, fabric and rust protection or window tinting.
Statutory Fractions. From 1 April 2014, there’s been a flat rate of 20% applied regardless of how many km’s were travelled in the FBT year, except where there is a pre-existing commitment in place before 7:30pm, 10 May 2011.
OPERATING COST METHOD
Operating costs. Includes actual costs such as running costs (repairs, maintenance, fuel, registration and insurance), and deemed costs such as depreciation and interest.
If the car is owned under lease, the leasing costs for the period it’s used to provide fringe benefits are also included in the operating cost.
For cars owned by the employer, deemed depreciation is calculated by multiplying the depreciated value of the car at the start of the FBT year by the deemed depreciation rate applied at the time the car was purchased. Deemed interest is calculated by multiplying the depreciation value of the car by the statutory FBT benchmark interest rate of 4.8% for 2021.
Logbooks. A log book must be maintained for a continuous 12-week period to represent the use for the full FBT year and to determine the applicable business percentage of a car.
Private use. Generally, any use of the car that is not for income-producing purposes such as travel to and from work is normally private use, even where the employee undertakes minor errands like collecting the mail.
Employee reimbursement. Any unreimbursed car expenses incurred, or contribution made by the employee can reduce the taxable value of a car fringe benefit under the operating cost method, as illustrated.
EXEMPT CAR BENEFITS
WORK RELATED TRAVEL IN COMMERCIAL CARS
A car benefit will be exempt where the vehicle is a taxi, panel van, utility or other road vehicle designed to carry a load, other than passengers of less than one tonne, and the employee’s private use is limited to incidental or minor work-related travel such as between home and work that is infrequent and irregular.
CARS USED FOR EMERGENCY SERVICES
Cars used for emergency services which are garaged or kept at or near an employee’s residence are exempt car benefits, where the car used is a police, ambulance or firefighting services vehicle; is fitted with flashing warning lights and a siren and has exterior markings which indicate its use.
CARS SUPPLIED BY PERSONAL ENTITIES
A personal service entity is unable to deduct car expenses from more than one car used by an individual. The second car benefits are exempt in relation to an FBT year.
To find out if your business need to lodge FBT return for year 2021 ,
Please Click here Or Book a Free 15 minutes consultation.
FBT FACT SHEETS
Home | FBT | Workhorse Vehicles and New Safe Harbour ProvisionsWorkhorse Vehicles and New Safe Harbour ProvisionsYou may provide your employees with benefits you do not usually provide because of...
Home | FBT | Are there any Special Covid-19 Exemptions for FBT?Are there any Special Covid-19 Exemptions for FBT?You may provide your employees with benefits you do not usually provide because of...
Home | FBT | Applying the Minor & Infrequent benefits ExemptionsApplying the Minor & Infrequent benefits ExemptionsMany employers are unknowingly falling foul of the FBT regime through an incorrect...
Home | FBT | Workhorse Vehicles and New Safe Harbour ProvisionsUsing an Associate Lease to boost family incomeAn associate lease is a tax effective way to acquire a vehicle while boosting the income...
Home | FBT | Providing Cars to Employees – Tips & TrapsProviding Cars to Employees – Tips & TrapsThe provision of company cars to employees is a regular practice across the Australian business...
Home | FBT | How The ATO Identifies Potential FBT EmployersHow The ATO Identifies Potential FBT EmployersThe ATO has signalled that there will be an increased focus on FBT this year. Given the...
Home | FBT | Entertaining, Meal FBTEntertaining, Meals and FBTAn everyday occurrence across the business landscape in Australia is the practice of taking both existing and potential clients out for...
Why You Should Lodge an FBT Return in 2021Even though Fringe Benefits Tax (FBT) is designed to capture benefits enjoyed by an employee, it is levied on the employer. Unless your employment agreement...
Home | FBT | Fringe Benefits TaxFringe Benefits TaxOn 31 March 2021, the Fringe Benefits Tax (FBT) year ends. With the ever-increasing budget deficits as a result of COVID-19, the ATO will be...