The statutory method for car benefit FBT calculations is used when the operating cost method is not selected (e.g. if there is no log book) or if the formula provides a more favorable result. The FBT benefit value is determined by multiplying the car’s cost by 20%, and apportioning it for days of private use.
The statutory formula method of valuing a car fringe benefit may deliver an advantage because the FBT tax valuation is based on an arbitrary flat 20% of vehicle cost, and not necessarily reflective of the actual value of the car benefit.
The Statutory Formula method applies a statutory fraction, currently 20% regardless of kilometres travelled, to the base value of a car to determine the FBT-taxable value of the car benefit.
The statutory formula is based on:
- cost of motor vehicle
- date of purchase
- number of days of private use
- employee contributions (if any)
Taxable value = [ Cost of Car x Statutory Rate* x Days Private Use] ÷ 365
– Minus Employee Contributions
Cost of the car (base value)
The cost for formula purposes includes dealer delivery charges, GST and any customs duty paid on the motor vehicle.
Not included are registration, stamp duty and extended warranty costs.
See further Tax Office guidance on the calculation of ‘Cost Price’: TR 2011/3 Fringe benefits tax: meaning of ‘cost price’ of a car, for the purpose of calculating the taxable value of car fringe benefits
The cost – base value – of the car is reduced by one third after it has been owned or leased for four years, determined at the commencement of the FBT year.
The current statutory rate is 20%.
Amendments to the formula from the 2011 year reduced an advantage which was previously available in relation to vehicles with high kilometres travelled in the FBT year.
Until 10 May 2011 the statutory rate was determined by the distance travelled by the vehicle during the tax year.
The statutory rate percentages were changed with effect from 10 May 2011 to phase in a flat rate of 20% over 4 years. Contracts which existed at that date continued to receive the benefit of the old (more generous to high distance) rates.
The statutory percentages for commitments entered into after 7.30pm AEST on 10 May 2011:
|Total Kms – FBT year||From 10 May 2011||From 1 April 2012||From 1 April 2013||From 1 April 2014|
|15,000 – 24,999||20%||20%||20%||20%|
|25,000 – 40,000||14%||17%||20%||20%|
The statutory percentages for commitments entered into up to 7.30pm on 10 May 2011 were:
|Total Kms – FBT year||Statutory %|
|0 – 14,999||26%|
|15,000 – 24,999||20%|
|25,000 – 40,000||11%|
Where a car hasn’t been held for the full year, the kilometres are annualised for the purpose of determining the applicable statutory fraction, based on the days held (not just the days available for private use).
Reducing FBT With Employee Contributions
Employee contributions directly reduce the value of an FBT benefit on a dollar-for-dollar basis, and may be cheaper option where the employee’s tax rate is lower than the current FBT rate (which matches the top marginal personal tax rate), and after adjusting for GST if applicable.
Employee contributions are comprised of unreimbursed after-tax contributions made by the employee to the employer which can also be given effect to by journal entry (see MT 2050). Such contributions are considered a taxable supply and require the employer to account for 1/11 of the amount as GST.
Employee contributions may also comprise a declaration (in approved format) of fuel and oil costs and substantiated (i.e. normally receipts) of other car expenses. Such payments are normally GST inclusive and are not a taxable supply.
Where a car is provided by an employer to an employee (including lease-back arrangements) the employee cannot claim deductions for business use.
- Australian Taxation Office: Statutory Formula Method
This page was last modified 2021-05-27