Motor vehicles provided by employers and FBT
Where an employer provides an employee with a motor vehicle to enable the employee to carry out his or her employment duties, and the motor vehicle is used for private purposes or is deemed to be available for private use, a car fringe benefit arises.
It may be that the private use is limited to work-related travel and any other private use is minor, infrequent and irregular, in which case the private use could be exempt from fringe benefits tax however there are few cars listed as eligible for exemption!
Should such an exemption not be available, then the taxable value of the motor vehicle fringe benefit may be calculated using either the concessional statutory formula method or the operating cost method.
Generally, the concessional statutory formula method produces a better outcome where the motor vehicle has been used mainly for private purposes. Further, this method does not require much in the way of record keeping.
The more significant the business use of the motor vehicle as against private use, the operating cost method is more likely to result in a lower FBT liability.
As an alternative to the provision of a motor vehicle by the employer, and the FBT consequences, it may be that payment of an allowance to the employee through the PAYG system at either a fixed or cents per kilometre rate for use of his or her private vehicle would appeal as an option.
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