Fringe Benefits Tax, commonly referred to as FBT, plays a fairly important role when it comes to motor vehicles and can impact employers and employees alike.
So, whether you’re a business owner providing company cars or an individual who’s benefiting from one, we’ll be breaking down all you need to know about FBT and its implications in this guide.
What Is FBT?
In essence, FBT is a tax that’s imposed on employers for any of the non-salary benefits they give their employees. These kinds of benefits are usually quite wide and range anywhere from health insurance to gym memberships, and yes, even more expensive benefits like motor vehicles.
Generally speaking, if an employer provides a motor vehicle to their employees for personal use, it’s likely to fall under the purview of FBT.
FBT and Motor Vehicles: The Connection
Regarding motor vehicles specifically, FBT comes into play when an employer gives an employee a car. This typically encompasses everything from commuting to running personal errands – essentially any non-work-related driving the employee does.
The amount of taxation that’s actually applied is based on the value of the vehicle and how much the employee is using it.
Calculating FBT on Motor Vehicles
Because it involves various different factors, working out how much FBT is charged on motor vehicles can be fairly nuanced. Still, the primary two methods that are used for this are as follows:
- Operating Cost Method
This first method takes all of the costs associated with the car’s operation into account – fuel, maintenance, insurance, and even depreciation, for instance. After this, the extent of personal use is then multiplied by these expenses to figure the total taxable value.
- Statutory Formula Method
This method is more straightforward but definitely less precise – simply applying a set percentage (usually around 20%) of the vehicle’s cost price as the taxable value, regardless of the actual costs or usage.
Exemptions and Exceptions
Though FBT generally always applies to motor vehicles, there are still a few instances where certain concessions might come into play that reduce or even eliminate the FBT liability – if the vehicle is mainly used for business purposes or if it falls under specific work-related categories (like taxis or emergency vehicles), for example.
Staying Informed: The Key to Compliance
FBT regulations and other aspects of your business’s taxes are naturally prone to change over time, so it’s paramount that you stay in the loop with all the latest rules and guidelines.
At Advisory One, we help simplify the tax process for your business, whether that’s with our accounting or advisory services. If you’d like to learn more about FBT and motor vehicles or any other financial concerns, don’t hesitate to get in touch or visit our office in Shop 1/205 Howick Street, Bathurst, NSW, Australia.