Fringe benefits are benefits that are provided to someone because they are an employee of a company.
There are many things that an employer can offer their employees sepa-rate their salary or wage and one of the more common fringe benefits for employers to offer to their employees is a car.
When a company owns a vehicle that is accessible for private use by em-ployees or a business owner, the right to use the vehicle is considered to be a benefit to the employee by the ATO.
Fringe Benefit Tax (FBT) is the tax that employers pay on these benefits. Seperate to income tax, FBT is calculated based on the taxable value of the fringe benefits provided, therefore it is really important that the valueof fringe benefits is recorded.
The value of car fringe benefits can be calculated by making a choice between two different methods before adding an employee contribution that can reduce the taxable value down to zero before Fringe Benefits Tax (FBT) is applied. The statutory method and the logbook method.
Statutory Method
The simplest choice is the Statutory Method. This is where the annual FBT is payable on 20% of the cost of the vehicle. There is minimal documentation required for this method but the amount the employee is required to contribute to reduce the taxable value of the benefit to zero is usually more than would be required for the Logbook Method.
Logbook Method
To minimise tax payable it is necessary to show the amount the vehicle is used for business. If you choose for the vehicle costs to be accounted for in this way a logbook recording the travel over a continuous period of 12 weeks must be kept. With the Logbook Method the employee contribution amount required to reduce the taxable value to zero is usually less than would be required for the Statutory method. In addition to having a logbook, it will be necessary to lodge a FBT return to notify the ATO of this even if the FBT payable is zero.
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