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A Quick Reference For Australian Tax Rates And Related Information

A Quick Reference For Australian Tax Rates And Related Information

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  7. Car Fringe Benefits

Car Fringe Benefits

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.

Generally the choice of calculation method is between the Operating Cost method (requires a log book) and the Statutory method.

Compare Operating Cost & Statutory Methods – Calculator

Plug your numbers into the calculator to compare.

FBT Car Benefit Method Calculator

FBT Car Benefit Method Calculator

Compare the statutory formula method and operating cost method

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%
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$
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Comparison - Taxable Value

Statutory formula method

$10,000

Taxable value = (car value × 20% × days/365) − employee contributions

Operating cost method

$6,500

Taxable value = (annual operating costs × private use % × days/365) − employee contributions

Gross-up Factors
Grossed-up Values

Statutory formula method

$20,802

Taxable value × 2.0802

Operating cost method

$12,264

Taxable value × 2.0802

Fringe Benefits Tax Payable

Statutory formula method

$9,777

Grossed-up value × 47%

Operating cost method

$5,764

Grossed-up value × 47%

This is simply a calculator for comparison purposes. Please seek professional guidance.

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

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 still be taxed as a residual fringe benefit.

Vehicle Usage Exempt From FBT

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.

Under 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 (PHEV) 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.

FBT on Expense Reimbursements

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.

These payments don’t attract FBT if they are limited to the Commissioner’s set rates.

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 (but 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.

COVID-19 and car fringe benefits

Garaging at home arrangements caused by the impact of COVID-19 on employees potentially created a higher exposure to the “available for private use” deeming of a fringe benefit than might otherwise have been the case.

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.

Special arrangements for 2015-16

The set rate per kilometre for reimbursement of vehicle expenses (up to 5,000 kms) was changed to a single flat rate basis of calculation starting from the 2015-16 financial year. To avoid confusion (for the year ending on 31 March 2016, the Tax Office accepted that 2014-15 rates may also be used for 2015-16 FBT calculation purposes.

Further information

This page was last modified 2023-07-11