Tax Law - Fringe Benefits Tax (FBT) - Considerations for Motor Vehicle FBT

Taxpayers need to know the type of analysis carried out by the ATO where car fringe benefits are involved. In order to address this properly the following matters need to be considered:

(i)                    What is a car fringe benefit?

(ii)                  The special rules for emergency services cars

(iii)                Taxable value

(iv)                 Choosing the valuation method

(v)                  The Statutory formula method

• The base value of any car you own
• The base value of a car you lease
• The cost price
• Reducing the base value after four years
• Safeguards
• Determining the statutory percentage
• The annualized kilometers
• Determining the number of days available for private use
• Determining the employee contribution

(vi)          Operating cost method

• Determining total operating cost
• Actual operating cost
• Deemed operating cost
• Depreciation
• Cost price
• Change to depreciation rate
• Determining percentage of private use
• Private use generally
• Travel while on call
• Business trip on the way to/from work
• Employment duties of an itinerant nature
• Travel between place of employment or business
• Determining the employee contribution

(vii)         Exempt car benefits

• Dual cab vehicles
• Modified cars
• Unregistered vehicles
• Personal services entities

(viii)        Novated leases

• Full novation
• FBT consequences of full novation
• Split full novation
• FBT consequences of split full novation
• FBT consequences of purchasing the car less then market value
• Transfer of lease to new employer

(ix)          Record keeping requirements for cars

• Fuel and oil expenses declaration
• Satutory formula methods records

(x)           Base value

(xi)          Total kilometers travelled

(xii)         Days available for private use

(xiii)        Calculating and substantiating the percentage of business use

(xiv)        Estimating the business kilometers travelled in a logbook year

(xv)         Estimating the business kilometers in a non-logbook year

(xvi)        Replacement cars

(xvii)       Logbook year

Changes and updates are made quarterly further complicating this area of car fringe benefits. Do not forget that benefits may be provided to a third party on behalf of the employer or may be provided to a third party on behalf of an employee. FBT reviews and audits have trouble written all over them so be careful.

Fringe Benefits Tax Non-Compliance is receiving special attention from the ATO currently. This is an area which has been neglected for many years and a number of letters or notices are being sent to taxpayers reminding them of their obligations in this area. Where considerable sums of money are involved you should contact LAC Lawyers for assistance before matters get out of control