Novated Lease FBT

Fringe Benefits Tax (FBT) is applicable to all vehicles under a novated lease. There are two types of methods for calculating FBT on a motor vehicle, the statutory formula method and the operating cost method. The statutory method makes no distinction between private and business use. It is therefore the more appropriate method to use where a vehicle has high private use. The Operating Cost method may be suitable where a high business usage is involved. There is also the Employee Contribution Method where an employee makes a post tax contribution towards the running costs of the vehicle (where employer policy allows).

Using the Statutory Formula Method

A x B x C / D – E

where:

A = the base value of the car

B = the statutory percentage

C = the number of days in the FBT year when the car was used or available

D = the number of days in the FBT year

E = the employee contribution

What is the base value of a vehicle? (A)

The base value of the vehicle is the purchase price paid by the employer including GST. The base value includes all accessories (for example, air-conditioning and car phone) but excludes registration and stamp duty costs.

What is the statutory fraction? (B)

The statutory fraction is based on the total annualised kilometres travelled by the vehicle as shown in the table below. If the vehicle is held for less than the full year (that is, purchased or sold during the year), the annualised kilometers are the total kilometres travelled during the period, multiplied by the number of days in the FBT year and divided by the number of the days held.).

What do you mean by availability of the vehicle? (C)

The days on which the car fringe benefit is provided is calculated as the number of days the vehicle is available, or deemed available for private use.

A car is available or deemed available for private use if:

• The car is used for business AND for private means.
• The car is garaged at the employee’s residence or place of accommodation; or
• The car is not at the Employer’ business premises and the employee has the use, custody or control of the car

What is an FBT year? (D)

FBT is calculated based upon the FBT year which runs from 1st April to 31st March.

What is the employee contribution? (E)

A post-tax payment made by the employee towards the cost of the benefit reduces the taxable value. The payment must actually have been made within the current FBT year before it can be taken into account. The employee contribution includes any non-reimbursed payment of car expenses (registration, insurance, repairs, fuel etc.).  In order to obtain this FBT reduction against liability, documentary evidence must be supplied ie fuel receipt for vehicle detailing the date, amount paid and supplier.