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Employers generally need to pay fringe benefits tax (FBT) on cars provided to their employees for private use.
The definition of a car here is a passenger vehicle designed to carry fewer than 9 passengers (including the driver), including a 4-wheel-drive vehicle but not a motorbike.
Refer to How FBT applies to cars to find cars exempt from FBT.
There are two methods to calculate FBT on cars provided to your employees:
Employers can use any method for any car regardless of which method they used in a previous year.
There are three steps required to calculate your FBT payable amount.
Step 1: figure out the FBT taxable value (statutory vs operating cost method)
Let’s say the base value was $50,000, 30% private usage, the operating costs were $15,000, and no employee contribution was made. The FBT taxable value will be as follows:
With the statutory method: ($50,000 x 20% x 109.5 / 365) - $0 = $3,000
With operating cost method, ($15,000 x 30%) - $0 = $4,500
The employer should choose the statutory method to calculate the car fringe benefits tax.
Note that the operating method requires the employee to keep a logbook of at least 12 continuous weeks.
Step 2: Gross up the taxable value
The next stage is to gross up the taxable value with the corresponding rate.
Suppose the company providing car fringe benefits is entitled to GST.
Grossed up taxable value = $3,000 (FBT taxable value) x 2.0802 (type 2 gross-up rate) = $6,240.60
Step 3: Apply the FBT rate
The FBT rate for 2024FY is 47%. Finally, the amount of FBT payable will be as follows:
$6,240.60 x 47% (FBT rate) = $2,933
The same calculation for FBT is used for cars with a Bona fide lease. However, if the car fringe benefit is not provided by a bona fide lease, the arrangement is a property fringe benefit (for the car itself) or residual fringe benefit (for the use of the car). This may mean you pay more FBT.
CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.
For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au
