The statutory formula method of valuing a car fringe benefit can deliver an advantage because the FBT tax calculations are arbitrary, and not necessarily reflective of the actual value of the car benefit.
Recent amendments to the formula have sought to diminish this advantage, which typically arises in relation to a vehicle with high kilometres travelled in the FBT year.
The Statutory Formula method applies a statutory fraction to the base value of a car.
The statutory formula is based on:
- cost of motor vehicle
- date of purchase
- distance travelled (taken from odometer readings at the beginning and end of the year)
- 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 statutory rate is determined by the distance travelled by the vehicle during the tax year.
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 AESTon 10 May 2011:
|Total Kms – FBT year||Statutory Percentage|
|New contracts after 7.30pm, 10 May 2011|
|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 are:
|Total kms travelled in 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).
- 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
- Car fringe benefits calculator – operating cost and statutory methods
This page was last modified on 23 August 2017