What is a Car Fringe Benefit?

In Australia, a car fringe benefit refers to a non-monetary benefit extended by an employer to an employee in the form of the private use of a vehicle, which is either owned or leased by the employer. This benefit is considered to be a component of the employee's overall remuneration package and is subject to taxation under the Fringe Benefits Tax (FBT) regime.

Fringe benefits tax ‘FBT’ is levied against the employer, rather than the employee.

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How much is fringe benefits tax on a car?

Fringe benefits tax is 47% on the taxable value of the fringe benefit.

The taxable value of the fringe benefit for a car can be worked out in 2 ways:

1)    Statutory method

2)    Operating cost method

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Statutory method for car FBT

• 20% x Base value of car x [Days car available too employee / Days in year] – Employee contributions

The base value of the car is generally its cost price, including any accessories, but excluding any state or territory charges such as registration and stamp duty.

The above formula will give you the ‘taxable value of the fringe benefit’ which then needs to be grossed up by 1.8868 (if not registered for GST) or 2.0802 (if registered for GST) and then multiplied by 47% to give you the total FBT payable.

Operating cost method for car FBT

• Operating costs x Private use % - Employee contributions

Operating costs include fuel, maintenance, repairs, insurance, registration, and any other costs.

Private usage is worked out by keeping a logbook for a 12 week period and applying this to the whole financial year.

The above formula will give you the taxable value of the fringe benefit which then needs to be grossed up by 1.8868 (if not registered for GST) or 2.0802 (if registered for GST) and then multiplied by 47% to give you the total FBT payable.

What does the ATO consider a car for FBT purposes?

The Australian Taxation Office (ATO) considers a car to be any motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers, including any trailers or caravans towed by the car.

This includes sedans, station wagons, four-wheel drive vehicles, and panel vans, but excludes motorcycles, motor scooters, and similar vehicles.

It is important to know that ‘carry a load of less than one tonne’ refers to the difference between gross vehicle weight and kerb weight, it does not refer to the towing capacity.

 Do I have to pay FBT if I own a Pty Ltd company?

If you own your own Pty Ltd company and purchase a vehicle through the company to take advantage of depreciation incentives such as temporary full expensing, you may be liable for fringe benefits tax on the vehicle, if it is parked at your house and available for private use.

Need help with fringe benefits tax (FBT) in Australia?

CTK Accounting is an accounting firm based in Wollongong, Australia, just south of Sydney.

We are registered CPA’s and Tax Agents.

To reach out, please contact us through our contact page, or visit our home page for more information on our services.

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