Fringe Benefits Tax (FBT) – Motor Vehicle Use Fact Sheet

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What is Fringe Benefits Tax (FBT)?

Fringe Benefits Tax (FBT) is a tax paid by employers on benefits provided to employees outside of their salary or wages, — such as allowing private use of a company motor vehicle.

FBT applies if a car is used for or available for private purposes, including commuting from home to work.

FBT Rate and Grossing-Up

Payroll tax must be paid on the grossed-up value of fringe benefits.

FBT Rate: 47%
Gross-up rates (used to calculate taxable value before applying FBT):
– Type 1 (GST-creditable): 2.0802
– Type 2 (non-GST-creditable): 1.8868

Businesses registered for GST will generally use the Type 1 gross-up rate.

Valuation Methods for Car Fringe Benefits

Method One — Operating cost method	Method Two — Statutory formula method
Based on actual running costs of the vehicle.	Based on a flat 20% of the vehicle’s base value.
Business use % determined by a log book.	Private use assumed, regardless of actual use.
Log Book Requirements:
• Keep a 12-week log book for one representative period. • Must record: Date, start/end odometer, Distance travelled, Purpose of trip (business or private). • Valid for 5 years (unless usage changes). • Record odometer at 1 April and 31 March each FBT year.
Reduces FBT for high business use.	Simpler but may result in higher FBT where business use is high.

Worked Example – Comparison

Assumptions:

Vehicle cost: $60,000
Annual travel: 10,000 km
Business use (per log book): 70%
Annual running costs:
— Fuel: $5,000
— Insurance: $2,000
— Maintenance: $1,000
— Interest (7% of $60,000): $4,200
— Depreciation: $9,000
— (used for accounting, not FBT)

Method One — Operating cost method		Method Two — Statutory formula method
Total Operating Costs (excluding depreciation):	$12,200	Statutory Rate: 20%
Private Use: 30%		Base Value of Vehicle:	$60,000
Taxable Value: $12,200 × 30% =	$3,660	Taxable Value: $60,000 × 20% =	$12,000
Grossed-Up Taxable Value: $3,660 × 2.0802 =	$7,617.53	Grossed-Up Taxable Value: $12,000 × 2.0802 =	$24,962.40
FBT Payable: $7,617.53 × 47% =	$3,579.24	FBT Payable: $24,962.40 × 47% =	$11,732.33
Tax Deductions:		Tax Deductions:
• Business-use portion of running costs: • Depreciation: • FBT:	$8,540 $6,300 $3,579.24	Only the FBT payable is deductible:	$11,732.33
Total Deduction:	$18,419.24	Total Deduction:	$11,732.33
Tax Saving @ 25% =	$4,604.81	Tax Saving @ 25% =	$2,933.08

Summary Comparison

Method	FBT Payable	Total Deduction	Tax Saving (25%)
Operating Cost (70% business use)	$3,579.24	$18,419.24	$4,604.81
Statutory Formula (no log book)	$11,732.33	$11,732.33	$2,933.08

Key Dates

FBT Year: 1 April – 31 March
Lodgment Due: 21 May (or later with a tax agent)
Payment Due: Same as lodgment

Employee Contributions and FBT

Suppose an employee makes an after-tax contribution toward the cost of using the vehicle (such as paying for fuel or a portion of the lease). In that case, this reduces the taxable value of the car benefit for FBT purposes.

These contributions must be:
• Made from the employee’s after-tax income
• Paid directly to the employer or a third party on behalf of the employer
• Documented and accounted for in the FBT return

Expanded Example – Including Employee Contribution

Let’s revisit the Operating Cost Method example and assume an employee makes a $1,500 after-tax contribution toward the car’s operating costs.

Method One — Operating cost method
Original Taxable Value:	$3,660
Less: Employee Contribution:	$1,500
Adjusted Taxable Value: $3,660 – $1,500 =	$2,160
Grossed-Up Taxable Value: $2,160 × 2.0802 =	$4,492.23
FBT Payable: $4,492.23 × 47% =	$2,111.35
FTB payable saving: $3579.24 (original amount) – $2111.35 =	$1467.89