Fringe Benefits Tax

A fringe benefit is something extra you get from your employer aside from your wage or salary. It can also be something additional you receive in return for foregoing some of your salary under a salary sacrifice arrangement.

A fringe benefit can be given for use by you, your spouse or your children. Your employer is liable for the tax (known as Fringe Benefits Tax) that may apply to the benefits that you and/or your family may receive – not you.

A wide range of perks are classed as fringe benefits. The most common ones are:

• A leased vehicle for your personal use (under a ‘novated lease’ arrangement)
• Personal use of a company car
• Discounted loans
• Gym/health-related memberships
• Entertainment expenses including free/discounted food, cinema tickets and accommodation
• Private health insurance
• Living-away-from-home allowance (LAFHA)
• Real property, such as land and buildings
• Right to property, such as shares and bonds
• Childcare costs and school fees

Items you need to do your job – e.g. mobile phones and occupational-specific clothing – aren’t generally taxed as fringe benefits, particularly if they’re provided to you by your employer.

Electronic FBT logbooks are typically more accurate as they remove the risk of human error that comes with manual entry and collects the data needed for FBT returns quickly and easily, saving time and labour.

The taxable value of a car fringe benefit is designed to reflect an employee’s ‘private use’ of the vehicle, as only the private use of the car is subject to Fringe Benefits Tax (FBT). Additionally, the FBT law allows ‘employee contributions’ to reduce the taxable value of the car’s Fringe Benefits Tax.

There are two ways to calculate Fringe Benefits Tax for motor vehicles:

1. The statutory formula method
The statutory formula method is based on the car’s cost price and has traditionally been more popular with business owners because it is a straightforward way of calculating your vehicle‘s FBT. A flat rate of 20% of the car’s base value is used, taking into account how many days of the year the vehicle is available for private use.
2. The operating cost method
The operating cost method is based on the costs of operating the car. It is commonly referred to as the ‘logbook method’ as it requires a business to use logbooks to record how much each vehicle is used for work purposes and how much for private use.
When calculating vehicle FBT using the operating cost method, a logbook must be maintained for a period of 12 consecutive weeks for each vehicle and it should detail the purpose of each trip, how many kilometres were travelled and whether it was work-related or private. That logbook is then valid for the next five years, provided there is no meaningful change in the business pattern of use..

With telematics, it’s easier to maintain logbook records as it automatically details trips taken and classifies trips as either business or personal and stores all records electronically. All trip data can then be viewed on an online reporting platform, reducing back-office administration.

Electronic FBT logbooks are typically more accurate as they remove the risk of human error that comes with manual entry and collects the data needed for FBT returns quickly and easily, saving time and labour.