"The Fast and the Furious" Article by Tina Zawila

If you are an employer who provides your employees with the use of a motor vehicle, or if you are an employee who has the use of an employer-provided vehicle, or salary sacrifices a motor vehicle, you need to be aware of recent proposed legislative changes.

On 16 July 2013 the Federal Government announced plans to change the method of calculating the Fringe Benefits Tax (FBT) on cars provided by employers to their employees.

The proposed reform will remove the statutory formula method for both salary-sacrificed and employer-provided car fringe benefits for new contracts entered into after the announcement, with effect from 1 April 2014.

Therefore, the more onerous operating cost method will need to be used.  This method is based on the actual business use of the car, which must be determined by a logbook.  A logbook must be kept for a period of 12 weeks to record business kilometres travelled, for each and every vehicle, and for each and every employee arrangement.

The operating cost method also requires greater record-keeping on the part of both the employer and employee.  As this method relies on the calculation of all repairs, maintenance, fuel, registration, insurance, leasing costs, depreciation and the cost price in respect to every vehicle.

The statutory method, on the other hand, applied a set percentage to a specifically determined value of the car depending on the number of kilometres travelled.  Thereby only requiring the value of the car to be determined and a record of the annual number of kilometres travelled (irrespective of actual business or private use).

These proposed changes are likely to see a significant decline in the number of vehicles provided to employees by employers, as the cost will be too onerous on businesses.

The only good news is that the proposed arrangements only apply to “cars”.  Many dual cabs will fall outside the scope of these changes.

Which method of calculating FBT do you use for vehicles?
As an Employer, have you assessed your fleet and the impact on your record keeping?
As an Employee, have you considered your obligation to keep a log book?

At Sothertons we can assist you with all taxation matters including FBT on Motor Vehicles, to help you meet your obligations with the Australian Taxation Office, contact our office today on (07) 4972 1300.