When a car is provided in respect of employment, car FBT can arise.
A car fringe benefit, and therefore FBT on cars, arises when a car which is owned or leased by the employer (or associate or third party) is made available to an employee or associate for private purposes.
Crucially, private use calculations are generally based on the number of days a vehicle is available for private use, not actual use. A car is considered to be available for private use if it is garaged at or near the employee’s home or is in the employee’s custody or control. See TD 94/16
Garaging at home arrangements caused by the impact of COVID-19 on employees potentially create a higher exposure to the “available for private use” deeming of a fringe benefit than might otherwise be the case under normal circumstances.
However the Tax Office has acknowledged that the impact of COVID-19 can be taken into account; If the car isn’t being driven at all and the operating cost method is used, then FBT may not arise.
Full details of the application of a COVID-19 exclusion and the records required are set out in the Tax Office’s publication COVID-19 and car fringe benefits.
FBT can also arise when motor vehicle expenses are reimbursed, except where the reimbursement is on cents per kilometre basis, such amounts being income to the employee (however see Work Related Car Expenses). Such reimbursement payments are not actually car fringe benefits, but are treated for FBT purposes as an Expense Payment Fringe Benefit. Such payments don’t attract FBT if they are limited to the Commissioner’s set rates.
Special arrangements for 2015-16
The set rate per kilometre for reimbursement of vehicle expenses (up to 5,000 kms) has been changed to a single flat rate basis of calculation from the 2015-16 financial year. Because of potential confusion over which rates will meet FBT requirements (for the year ending on 31 March 2016), the Tax Office has accepted (item 5.2) that 2014-15 rates may also be used for 2015-16 FBT calculation purposes.
Car fringe benefits apply to “cars”.
The following are considered to be “cars”:
- a sedan or station wagon
- any other goods-carrying vehicle with a carrying capacity of less than one tonne, such as a panel van or utility (including four-wheel drive vehicles)
- any other passenger-carrying vehicle designed to carry fewer than nine passengers.
Other vehicles such as panel vans and utilities designed to carry a load of 1 tonne or more do not meet the definition of “car” and therefore do not fall within the car FBT rules. However non-exempt private use can be taxed as a residual fringe benefit.
The following vehicle usages are exempt from FBT:
- travel between home and work
- incidental travel in the course of performing employment-related travel
- non-work-related use that is minor, infrequent and irregular
- electric cars, zero or low emissions vehicle (non-LCT) from 1 July 2022
“minor, infrequent and irregular” usage is considered quite strictly. The ATO provides the example of occasional use of the vehicle to remove domestic rubbish as being with the exemption. Regular shopping trips or taking kids to or from school are not. (See Bantacs discussion of this topic here.)
Car running costs for a vehicle which is already subjected to an FBT calculation valued under the statutory formula method, and the total of expenses (if any) paid by the employee are also excluded.
Electric, zero or low emissions vehicles
For FBT and income tax guidance on electric vehicles, refer to Draft Practical Compliance Guideline PCG 2023/D1.
For the purposes of the guidelines, a zero or low emissions vehicle is a
- battery electric vehicle
- hydrogen fuel cell electric vehicle, or
- plug-in hybrid electric vehicle.
From 1 April 2025, fresh arrangements for hybrid vehicles are not included.
EV Home Charging Rate
For an employee charging an employer-provided EV at home, the electricity used can be claimed as a tax deduction.
Actual electricity costs can be claimed (for which supporting records are required) or the Draft Guideline can be relied upon to claim a rate of 4.2 cents per km (2022-23 tax and FBT years), relying on odometer records of business kms travelled. At least one electricity bill is required, to confirm that electricity costs were actually incurred.
ATO home charging rate for electric cars:
From 1 April 2022 (FBT) or 1 July 2022 (Income Tax): 4.20 cents per business km
Example calculations have been included in the Draft Guideline.
A vehicle garaged at (or near) home is considered to be available for private use.
See further: Car fringe benefits
See also: Residual Fringe benefits
Ruling: Provision of e-bike not a car benefit (it’s a residual benefit)
A Class Ruling issued covering salary packaging arrangements with Urban Mobility Pty Ltd for the provision of electric bicycles has confirmed that a car benefit does not arise.
It is considered that a residual benefit as described in section 45 arises from the employee’s use of an e-bike.
This is consistent with Class Ruling CR 2015/80.
See: Class Ruling CR 2022/35 Urban Mobility Pty Ltd – use of an electric bicycle by an employee.
Calculation of FBT on cars
There are three possible ways to calculate FBT on cars. The “best” method, i.e. the method with potentially lowest FBT impact, will depend primarily on the cost of the vehicle, extent of private use, and the availability of substantiating records.
The possible methods are:
- Operating Cost Method
- Statutory Formula Method
- Expense Reimbursements (i.e. Expense Payment Fringe Benefit)
- FBT and Car Fringe Benefits – Moore Australia
- Practical Compliance Guideline PCG 2018/3 Exempt car benefits and exempt residual benefits
- TD 94/16 Fringe benefits tax: Available for private use
- See – Car FBT
- Car fringe benefits calculator
- FBT and vehicles other than cars
- Car leasing fringe benefits
This page was last modified 2023-07-11