In 2021, Australian businesses experienced the most significant disruption to their operations in a century with a COVID lockdown. There were so many things to worry about that Fringe Benefits Tax (FBT) and the rules that apply to fleet cars probably weren’t being considered.
When NSW and Victoria went into lockdown for over three months, most businesses let their employees park their cars at home which would normally attract FBT. The ATO has released a Fact Sheet on COVID-19 and car fringe benefits which could save your business thousands of dollars if you have the right record keeping.
There are two ways to calculate FBT. It’s calculated using either the:
- statutory formula method – the taxable value is a set formula based on the car’s cost price
- operating cost method – the taxable value is based on the operating costs of the car, reduced by any business use.
Here’s what the ATO Fact Sheet says about the COVID impacted 2021/22 FBT year:
For any car fringe benefits calculated using the operating cost method, you may adjust your business use estimates to reflect changes in your employees’ driving patterns due to COVID-19
Where a car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for the purpose of maintaining the car, we will accept that you don’t hold the car for the purpose of providing fringe benefits to your employee.
In these situations, provided you elect to use the operating cost method, there will be a nil taxable value for the car and no FBT liability. You need to elect to use the operating cost method 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 don’t elect to use the operating cost method, or don’t have odometer records, the statutory formula 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.
If an employee is driving a car for business purposes, and you elect to use the operating cost method, you may be able to reduce the taxable value of the car fringe benefit to take into account this business use. This may include reducing the taxable value to nil if the car is only being used for business travel.
You will only be able to reduce the taxable value if you have logbook records and odometer records for the period in question. If you have not previously maintained a logbook for the car, the logbook will need to be for at least:
- 12 continuous weeks, or
- until the car stops being garaged at home, if this is less than 12 weeks.
