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
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 for 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.[/su_spoiler]
What is a “car” for FBT purposes?
Car fringe benefits apply to “cars”.
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. They can however, if material, be taxed as a residual fringe benefit.
- Minor use by an employee of commercial vehicles such as panel vans, taxis or utilities designed to carry a load of less than one tonne, as are unregistered vehicles. See further: FBT Exempt vehicles
- Car running costs for a vehicle which is already subjected to an FBT calculation valued under the statutory formula method
- The taxable value of motor vehicle FBT is reduced by the amount of employee contributions, i.e. the total of expenses (if any) paid by the 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)
- Practical Compliance Guideline PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles
- See – Car FBT
- Car fringe benefits calculator
- FBT and vehicles other than cars
This page was last modified 2018-08-13