With the introduction of the new car fringe benefits legislation on 1 May 2011, it is worth revisiting the method chosen for calculating the car fringe benefits tax (FBT).
Previously, if you used the statutory formula method for calculating FBT, a sliding scale percentage would have been used. In this instance, the more kilometres the car travelled, the lower the percentage applied.
Under the 1 May 2011 changes, a flat 20 percent applies to all car fringe benefits provided after 7:30pm on that date. The rate is phased in gradually from 2011 to 2014 as outlined in the table below:
|
Total kms travelled in FBT year |
Old Rate |
From 1 May 2011 |
From 1 April 2012 |
From 1 April 2013 |
From 1 April 2014 |
|
Less than 15,000 |
26% |
20% |
20% |
20% |
20% |
|
15,000 to 24,999 |
20% |
20% |
20% |
20% |
20% |
|
25,000 to 40,000 |
11% |
14% |
17% |
20% |
20% |
|
Over 40,000 |
7% |
10% |
13% |
17% |
20% |
There are some circumstances where the old rates will still apply. An example of this is when there is a pre-existing commitment i.e. a lease entered into prior to 1 May 2011. However, should the terms of the agreement be varied or changed after that date, it may be considered a new agreement therefore the new rules would apply.
For cars travelling less than 15,000kms per year, the FBT rate has been reduced. For those travelling between 15,000km to 24,999km there is no change. However, for those travelling more than 25,000km, the rate has actually increased. Therefore, for drivers using their cars for business purposes and does more than 25,000km, it may be worth changing from the “statutory formula method” to the “operating cost method” to calculate FBT.
In order to use the “operating cost method”, remember that a log book must be prepared and kept. The logbook must be maintained for a continuous period of 12 weeks and contain the following information:
- The date the journey began and ended (multiple journeys are treated as a single entry)
- The odometer reading of the car at the start and end of the journey
- The number of kilometres travelled by the car, and
- The purpose of the travel
The odometer readings of the car must be recorded at the start and end of the FBT year. If you complete a logbook within 12 weeks of the end of the FBT year, it can be used for the preceding year.