FBT and the New Car Fringe Benefits Legislation
Since 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 then a sliding scale percentage was used. In this instance, the more kilometres the car travelled, the lower the percentage applied.
Under the May 1 changes, a flat 20 per cent applies to all car fringe benefits provided after 7:30pm on that date. The rate is phased in gradually from 2011 to 2014. This is 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, however, where the old rates will still apply. One such example would be where there is a pre-existing commitment (Eg: A lease entered into prior to 1 May 2011).
Should the terms of the agreement be varied or changed after that date it may be considered a new agreement. If so, the new rules would apply.
For cars travelling less than 15,000kms per year the FBT rate has actually been reduced and for those travelling between 15,000km to 24,999km there is no difference.
The rate has increased, however, for those travelling more than 25,000km. For drivers using their cars for business purposes that fall into this category, it may be worth moving from the ‘statutory formula method’ to the ‘operating cost method’ to calculate FBT.
In order to rely upon the ‘operating cost method’ a log book must be prepared and kept.
A 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, thereby, giving you the option to choose your FBT method for the FBT year ending 31 March 2012.