A car fringe benefit arises where a car that is held by the employer (or an associate of the employer) is provided to an employee and is either:
- applied to a private use by the employee, or
- taken to be available for private use by the employee.
A car is considered ‘held’ where it is owned, or leased, or hired on a long-term basis or on substantially continuous short-term hires. Arrangements with external car leasing providers fall within the definition of ‘held’.
There are two methods available to determine the value of a car fringe benefit for FBT purposes:
More information on car fringe benefits is available on the ATO website.
On 10 May 2011, the Australian Taxation Office made amendments to the statutory formula method. These changes apply to new vehicle contracts entered into after 7:30pm AEST on 10 May 2011 and were phased in over 4 years, as below:
|Total kms travelled during FBT year||Pre Existing Contracts|| From
10 May 2011
1 April 2012
1 April 2013
1 April 2014
|Less than 15,000||0.26||0.20||0.20||0.20||0.20|
|15,000 to 25,000||0.20||0.20||0.20||0.20||0.20|
|25,000 to 40,000||0.11||0.14||0.17||0.20||0.20|
Any car fringe benefits that are provided by an employer under a pre-existing commitment will be subject to the previous statutory fractions which are in the above table under “Pre-existing Contracts”. This will apply to vehicle contracts entered into on or before 10 May 2011.
The new statutory formula method calculates the taxable value of the motor vehicle benefit as a percentage of the car's value, based on the number of days during the FBT year on which the car was available for private use. The percentage is called the ‘statutory fraction’ and is listed in the table above.
Availability for private use
A car is considered by the Australian Taxation Office to be available for private use if it is garaged at or kept at or near your private residence and/or in your custody and control. Driving your car from home to work is considered private use for tax purposes.
Situations in which a car is considered to not be available for private use are:
- the car is off the road for any reason for more than three days e.g. extensive repairs are being carried out, as opposed to a routine service or maintenance;
- you are travelling and the vehicle is not garaged overnight at your place of residence e.g. it is garaged in the basement of Parliament House and the keys to the vehicle are held by your office and there is a prohibition on the private use of the vehicle.
Important: The lower the number of days available for private use, the lower the value for FBT purposes. This means a lower Reportable Fringe Benefit shown on your payment summary and less fringe benefits tax paid by M&PS.
Under the statutory formula method, the value of the benefit is calculated as follows:
Cost of the Car X Statutory Percentage X Days Vehicle Available for Private Use / Days in the Year less Employee Contributions
An “employee contribution” is any after-tax payment made towards the cost of the car that has not been reimbursed by M&PS.
|Notional value of the vehicle:||$28,500|
|Number of kilometres driven in the year:||14,980|
|Days available for private use:||366|
|Contributions made by employee:||Nil|
|Value of the benefit||=||Cost of the Car X Statutory Percentage X Days Vehicle Available for Private Use/Days in the Year less contribution|
|=||28,500 X .20 X 366/366 – Nil|
|Grossed up value of benefit||=||5,700 X 1/(1 – 0.49)|
|=||5,700 X 1.9608|
The grossed up amount of $11,177 would appear on the employee's payment summary.
This method calculates the taxable value as a percentage of the total costs of operating the car during the FBT year. The value for FBT purposes is the private use percentage.
To determine the business and private use percentage, a logbook must be maintained.
The logbook is required to be maintained for a continuous period of 12 weeks for the first year the logbook method is used and then every 5 years. The period may overlap 2 tax years.
Logbooks are required to include the following details for every business journey:
- dates on which the journey began and ended
- odometer readings at the start and end of each journey
- kilometres travelled
- purpose of the journey.
Under the Operating Cost (log book) method, the value of the benefit is calculated as follows:
Total Operating Costs X Percentage of Private Use less Employee Contribution
A car is leased by the employer and provided to an employee. The following costs were incurred for the FBT year ended 31 March 2016:
A logbook has been maintained for a continuous period of 12 weeks with the following information:
|Total kilometres travelled||15,436|
|Business kilometres travelled||5,650|
Business use is 37%
Private use is 63%
The employee made no employee contribution during the FBT year.
|Value of the benefit||=||Total Operating Costs X Percentage of Private Use less Employee Contribution|
|=||$14,010 X .63 – Nil|
|Grossed up value of benefit||=||$8,826.30 X 1 / (1 – 0.49)|
|=||$8,826.30 X 1. 9608|
The grossed up amount of $17,307 would appear on the employee's payment summary.
Pooled or shared cars
A pooled car is a car that is provided to two or more employees for private use. For example, if you have nominated another employee as a person who may drive your car and if that person has driven your car for private purposes on one or more occasions during the FBT year, then the car will be a pooled car. Where pooled cars are subject to FBT, the benefit will not count towards the employees’ RFBA, as pooled cars are excluded from being reported on an employee’s payment summary.