Fringe Tax Benefits or FBT is a tax an employer pays on certain benefits provided to their employees, but in a different form to salary or wages
Providing employees with a lease car (novated lease) is an example of such a benefit. Novated leasing, also known as salary sacrificing, is becoming an increasingly popular option that allows you to finance vehicle payments directly from your regular pay through your employer.
The past two years have been incredibly challenging for everyone and with people working from home across the country, one of the trends we have seen across our fleet has been the rapid drop in vehicle use by employees and lower kilometres.
For employers though, with many not driving their vehicles to work, what has this meant for Fringe Benefits Tax or FBT?
The ATO has released a fact sheet about vehicles provided by companies during the pandemic that says:
“Where a car isn’t being driven at all or is only being driven for maintenance purposes, we accept that you aren’t holding the car for the purposes of providing fringe benefits. If you elect to use the operating cost method and maintain appropriate records, you may not have an FBT liability for a car”.
There are two types of methods for calculating FBT – the Statutory method, where a flat 20% of the value is taxed irrespective of the kms travelled, or the Operating Cost method (logbook method) which has FBT payable on a taxable value based on the operating costs of the car, reduced by any business use.
Despite changes in driving patterns due to COVID-19, if you are already using the operating cost method, you may have an existing logbook in place. All you need to do is keep odometer records, and these will show how much the car has been driven during the year, including any lockdown periods. This method needs to be opted in writing before you lodge your FBT return for the year. You should maintain odometer records to show that, during the period the car is garaged, it has not been driven, or has only been driven briefly for the purposes of maintaining the car.
If you elect not to use the operating cost method or don’t have odometer records, the statutory method applies and you will have an FBT liability for the year. This is because the car is garaged at the employee’s home and is taken to be available for private use.
Vehicle telematics can be a great way to monitor vehicle usage and keeping digital logbooks to assist with the end of FBT year calculations and, when coupled with an optimised FBT report, can help reduce FBT paid across the fleet.
For more information on how StreetFleet can help to reduce FBT across your fleet, contact us today.