ATO simplifies calculation of car fringe benefits

Car fringe benefits

David Sofrà and Ben Watkinson explore the ATO's new guidance on calculating FBT for cars.

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Cars parked

On 19 October 2016, the Australian Taxation Office (ATO) released Practical Compliance Guidelines (PCG) 2016/10 Fleet Cars: simplified approach for calculating car fringe benefits. These guidelines provide an optional, simplified approach to working out the business use percentage car fringe benefits for employers with a fleet of 20 or more ‘tool of trade’ cars. Under the new rules, employers that have valid log books for at least 75 percent of their qualifying cars, and that meet the additional criteria set out below, will be entitled to apply an average business use percentage to other qualifying vehicles that they don’t hold logbooks for.

The additional criteria to utilise these concessions are as follows:

  • The cars are not used by employees for predominantly private purposes
  • Employees are mandated to maintain logbooks
  • The cars are of a make and model chosen by the employer not employee
  • Each car in the Fleet has a goods and services tax (GST) inclusive value less than the relevant luxury car tax threshold; and
  • The cars are not provided as part of the employees remuneration package (i.e. not salary sacrificed).

These concessions apply from the current Fringe Benefit Tax (FBT) year forward, and so provide a great opportunity for employers with large tool of trade fleets to review their FBT processes with the view to implement this new approach. This may provide significant cost savings as vehicles that have previously been valued under the statutory formula method may now qualify for transition to a lower FBT taxable value under the operating cost method.

Should you have any further questions please do not hesitate to contact your KPMG professional.

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