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
OPERATING COST METHOD
An employer can use the operating cost method for a year where a log book hasn’t been maintained, however there is no reduction in the taxable value of the car for any business journeys made.
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.
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Disclaimer
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