Fringe Benefits Tax – Simplified Approach to Log-Books

Tax Insights

The ATO have taken steps to lessen the administrative burden for employers with a fleet of more than 20 cars with the release on 19 October 2016 of Practical Compliance Guideline 2016/10.  

Fringe Benefits Tax (“FBT”) applies to the provision of cars to employees and the employer can use either the operating cost or statutory method to determine the amount of FBT payable with respect to the car.  The operating cost method can result in a lower FBT amount payable if the business usage is high, however it can be administratively cumbersome.  Acknowledging the difficulties employers with a large numbers of cars face with respect to the maintenance of log books, the ATO have announced a Guideline which provides an optional simplified approach to determining the business use percentage when applying the operating cost method.

Under the simplified approach employers can apply an average business percentage to all “tool of trade” cars in the fleet in the log book year and the following four years.

A car is a “tool of trade” were  it is used extensively for business purposes eg, a car provided to a sales representative.  The Guideline indicates that a car used predominantly for private use eg, by an executive, would not be considered a “tool of trade” car.

The Guideline applies if: 

  • the employer has a fleet of 20 or more cars
  • the cars are “tools of trade” cars
  • employees are mandated to maintain a log book in the log book year
  • the employer holds valid log books for at least 75%  of the cars in the log book year
  • the make and model of the car is chosen by the employer rather than the employee
  • the GST inclusive value of the car is less than the luxury car limit (currently $64,132)
  • the car is not provided as part of an employee’s remuneration package (ie, not salary sacrificed) and the employee cannot elect to receive additional remuneration in lieu of the use of the car.

The simplified approach put forward by the ATO in the Guideline is a welcome move to address excessive compliance burdens which plague businesses.  We note that the 75% requirement for log books is still rather high and we would like this reduced further to a more manageable level.  We hope this is just one of many attempts by the ATO to help businesses reduce their compliance burden. 

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