Car FBT

FBT doesn’t come into play if the employee keeps an emergency service car at his home. Such cars are typically used by ambulance, police, or fire services, bear noticeable exterior markings as emergency vehicles, and are equipped with flashing lights along with horn, bell, or alarm systems.

Even if the employee stops to perform work-related tasks, such as picking up mail, while commuting between home and work, it still counts as private use. This means FBT applies.

However, certain situations might arise where travel between home and work could be considered as business use.

• Routine Servicing or Maintenance: Remember that even during routine servicing or maintenance, the car remains available for the employee’s private use. This means that FBT is applicable.
• Extensive Repairs (e.g., after an accident): If the car is undergoing significant repairs, such as those required after an accident, and is thus unavailable for private use, FBT doesn’t apply.

If the employer chooses to hire a car and offer it for his employee’s private use, the FBT treatment is the same as if the employer is the owner of the car. The categorization depends on the duration of the car hire:

• For hires lasting less than 3 months, it falls under the classification of a residual fringe benefit.
• For hires lasting 3 months or more, it’s considered a car fringe benefit.

Under the second condition, it must be ensured that the lease terms are rooted in the car’s residual value, which should be:

• determined through a reasonable valuation of the estimated market value at the lease’s end.
• not based on the reduced or net cost – this excludes the cost after any trade-in credit or employee cash contribution.
• at least equal to the minimum residual values outlined in the tax laws.

Also, if an employee provides a trade-in vehicle or cash contribution toward the car’s purchase, this shouldn’t reduce the lease payments or residual value.

If this condition isn’t met, the lease is categorized as either a property fringe benefit or a residual fringe benefit.

• acquire the car following the lease term’s conclusion.
• continue using the car beyond the lease’s termination.

This prohibition includes using a trade-in credit or cash contribution as a deposit or down payment toward the car’s purchase at the lease’s end.

If such an agreement exists:
 

• the lease is categorized as a property fringe benefit or residual fringe benefit.
• payments made within the lease are seen as capital, not lease payments. They constitute installments within an arrangement to eventually buy the car.

The employer manually calculates the taxable value of a car fringe benefit through either of these methods: 

• Statutory Formula Method: This involves using a predefined formula.
• Operating Cost Method: For this approach, the employer needs comprehensive records like log books to determine car costs and the percentage of private use.

Once the employer has the taxable value, he can use it to calculate the precise FBT amount.

If he opts for the operating cost method, he must maintain sufficient records like log books. Otherwise, the statutory formula method applies.

The decision to opt for any of the above methods must be made before the due date of the FBT return or by May 21 if a return isn’t mandatory.

Additional considerations include:
 

• For fleets with 20 or more cars, there’s a simplified record-keeping option.
• If the employee extensively uses an eligible commercial vehicle for private purposes, the FBT calculation rules differ.

When the statutory formula method is used to determine the taxable value of car fringe benefits, following elements are incorporated:

• A – Base Value of the Car: This is the price te employer (or a lessor) paid for the car, excluding registration, stamp duty, and any trade-in or employee cash payment. It also includes costs for non-business accessories, dealer delivery charges, and applicable GST and luxury car tax.
• B – Statutory Percentage: Generally set at 20% (unless an arrangement was in place before March 31, 2015).
• C – Private Use Days: Count the days during the FBT year when the car was used or available for the employee’s private use.
• D – Total Days in FBT Year: Calculate the total days in the FBT year (365, or 366 in a leap year).
• E – Employee Contribution: Consider the contribution made by the employee.

The formula to compute the taxable value is (A × B × C ÷ D) − E.

To calculate the taxable value of car fringe benefits using the operating cost method, following factors should be considered:

• A – Total Operating Costs: This covers all comprehensive operating costs, including deemed costs for depreciation and interest.
• B – Percentage of Private Use: Determine this percentage based on details from log books.
• C – Employee Contribution: Account for the contribution made by the employee.

The formula to establish the taxable value is (A × B) − C.

To use the operating cost method, an employee must keep and retain logbook records and odometer records. In a logbook year, a logbook must be maintained for 12 continuous weeks.

A logbook year is any year:

• that is the first year the employer uses the operating cost method;
• where none of the previous four years was a logbook year;
• the employer elects to do a new logbook; or
• the Commissioner requires the employer to treat the current year as a logbook year.

The period during which the logbook is kept must be specified. A logbook can be kept for up to five years (assuming there is no major change in the pattern of use).

Entries in the logbook must specify

• the date on which the journey began and ended;
• odometer readings at the beginning and end of the journey;
• number of kilometres travelled during the journey; and
• purpose(s) of the journey.