A car fringe benefit is calculated by either of the Operating Cost or Statutory Formula methods, or in the case of expense reimbursements the private use portion of the expense.
The taxable fringe benefit is reduced by the amount of any employee contributions.
The FBT Operating Cost Method – Log Book
Under the operating cost method, the taxable value of the fringe benefit is based on a private percentage of the vehicle’s total operating costs which include:
- lease costs if applicable, and
- if the vehicle is owned
- depreciation without regard to the depreciation limit, and
- an imputed interest factor at a statutory rate (see below).
To determine the business/private percentage under the operating cost method, a log book is required to be kept over a continuous 12 week period and renewed after 5 years, or earlier if required. The log book is to be submitted to the employer.
Vehicle cost for FBT purposes and depreciation
The vehicle cost for depreciation purposes includes dealer delivery charges, GST and customs duty if applicable.
The diminishing value depreciation percentage rate to be used is determined from the date of purchase according to the following table:
|Date purchased||Depreciation Rate
(Diminishing Value Method)
|before 1 July 2002||22.5%|
|1 July 2002 to 9 May 2006||18.75%|
|After 9 May 2006||25%|
The interest component for FBT purposes
The interest component of an owned vehicle cost is determined by a benchmark interest rate which is adjusted and announced annually in a Tax determination before the beginning of the FBT year.
Formula for Operating Cost Taxable Benefit:
Taxable value = [Total vehicle costs (including depreciation and imputed interest where the vehicle is owned)] x Private use percentage LESS Employee contributions
The Statutory Formula Method
The statutory formula method determines a taxable value from a statutory percentage of the car’s cost. The percentage is based upon the total number of kilometres travelled during the year.
This method requires that the following data be obtainedi:
a record of opening and closing odometer readings
cost of the vehicle
date of purchase
number of days the vehicle available for private use.
The taxable value of the benefit is reduced by the amount of employee contributions.
The statutory percentage to be applied will depend on whether the provision of the car benefit is under a pre-existing commitment on or before 10 May 2011.
|Pre 10 May 2011 Commitments|
|Annualised total Kms travelled for the FBT year||Statutory percentage|
|15,000 to 24,999||20%|
|25,000 to 40,000||11%|
The statutory fractions for new commitments entered into after 7.30pm on 10 May 2011, are being phased in to a standard 20%, as follows:
|After 10 May 2011 – New Commitments|
|Annualised total Kms travelled for the FBT year||From 10 May 2011||From 1 April 2012||From 1 April 2013||From 1 April 2014|
|15,000 to 24,999||20%||20%||20%||20%|
|25,000 to 40,000||14%||17%||20%||20%|
Formula for Statutory Formula Method Taxable Benefit:
Taxable value = [Vehicle cost x Statutory percentage x days private use] ÷ 365 LESS Employee contributions
The statutory formula method has a concessional effect when a high number of total kilometres is travelled with a high private use percentage, and when the vehicle has a low cost. The phase-in of the flat 20% statutory percentage will reduce this advantage.
There may also be scope for reducing the taxable value of the car benefit by ensuring that the periods in which the car is considered available for private use are minimised – for example by paying attention to where the car is garaged during periods of absence or while travelling. A car garaged at home will normally be treated as being available for private use.
A taxable motor vehicle fringe benefit arises where in respect of employment:
- a car owned or leased by the employer, associate or third party is made available to the employee/associate for private purposes to the employee; or
- an expense payment benefit will arise where the car is owned or leased by the employee/associate and car expenses are reimbursed by the employer.
Note: The devil is in the detail. The information on this page is a summary, and should not be relied upon as the final word in this complex area. Please consult references for essential detailed guidance.
Use of vehicles other than cars
If the motor vehicle provided is not a “car” – (which is a vehicle of less than one tonne carrying capacity, and designed to carry less than 9 passenger) – then the fringe benefit may be subject to FBT as a “residual benefit“.
Hire cars and taxis are excluded as car benefits, unless there is substantial continuity which the ATO treat as a period of at least 12 weeks. Such vehicle benefits would therefore normally not be valued as a car benefit, but treated as a residual benefit.
The valuation of residual benefits of vehicles other than cars may be calculated under the Operating Cost method (see below) or if there is extensive business use, the cents per private kilometre method (see table below).
FBT and private use of a car
The private use of a car, or availability for private use, is determined on a daily basis. A car is assumed to be available for private purposes if it is garaged at or near the employee’s (or associate’s) home or is in the employee’s custody or control.
Such deemed private use can be minimised in the employee’s absence (for example while travelling) by – for example – leaving the car with the employer, rather than being garaged at home.
A common instance of private travel is the trip between home and work. As is the case when claiming work-related expenses, the need to transport bulky work-related equipment can transform this journey into a work-related trip.
FBT-exempt private car use
- Minor use of commercial vehicles such as panel vans, taxis, or utilities designed to carry a load of less than one tonne, is exempt if the use is limited to
- travel between home and work
- travel incidental to work duties, and
- non-work-related use that is minor, infrequent and irregular
- Cars used for emergency services, fitted and marked as such, such as police, ambulance, fire services
- Unregistered vehicles held at all times by the provider and used wholly or principally in the business operations
FBT and vehicles which are not cars
Vehicles which are designed to carry at least 1 tonne or 9 passengers are not cars by definition, and therefore not caught within the car fringe benefit rules. However the residual fringe benefit rules may apply to the private use.
When there is extensive business use of the vehicle, the ATO provide a per kilometre rate for the valuation of the private use residual fringe benefit, as an alternative to the more records-intensive operating cost valuation method.
FBT under this method is calculated by the gross-up of Kms x $rate – normally at the Type 2 gross-up percentage as the employer is entitled to GST credits – and FBT is payable on the resulting value at the FBT tax rate.
Reduction in FBT value:
If there is an arrangement for the payment of vehicle expenses by the employee, these can be deducted from the calculated fringe benefit value. Estimates of fuel paid under such an arrangement are accepted by the ATO on the basis of average fuel prices and the number of private kilometres travelled.
The otherwise deductible rules
The value of the benefit may be reduced by the employee’s “otherwise deductible” amount – the amount of the benefit which would have been a tax deduction, had the employee paid for it. Substantiation must be obtained by the employer before lodgement of the relevant FBT return.
This page was last modified on 13 June 2017