This may drive business to implement new processes for managing
logbooks to reduce FBT liability using the operating cost method.
Particularly since paper logbooks are extremely onerous in
administration and compliance and newer technologies like GPS
logbooks are now available.
Currently under the statutory formula method, the taxable value
of a car fringe benefit is determined by a formula that is
The FBT cost of the car, otherwise known as the base
The number of kilometres travelled;
The period during the year where the car is available for
private use by the employee; and
Any post-tax employee contributions made by the employee in
respect of the car fringe benefit provided.
As part of the calculation, the number of kilometres travelled
during the FBT year is annualised and assigned to a statutory
fraction according to the below table:
Less than 15,000
15,000 to 24,999
25,000 to 40,000
The Greens are of the view that the current legislation
encourages employees with employer-provided cars to artificially
inflating the number of kilometres travelled during the FBT year in
order to obtain a lower statutory fraction and reducing the FBT
The expected measures seek to remove such incentives.
How will employees be affected?
For employees who in previous FBT years travelled 25,000
kilometres or more per year, the proposed measures, if enacted, are
likely to raise questions about the attractiveness incorporating
cars as part of their remuneration packages.
This is due to:
An increase in FBT as a result of the higher statutory
Where applicable, any post-tax employee contribution made by
the employee will also have to be increased in order to reduce the
FBT payable to nil.
Some employees may resort to the use of logbooks to reduce the
FBT arising from the current lease arrangements. However, the
record-keeping requirements for vehicle logbooks are often onerous
and prone to errors. The use of electronic logbooks may assist in
It is also worthwhile noting that employees who travel less than
15,000 kilometres for the FBT year will benefit under the proposed
measures given the reduction of the statutory fraction from 0.26 to
Potential implications for employers
From the employers' perspective, the FBT liability will
increase. In some cases, employers will be required to complete
logbooks to keep this cost down by using the operating cost
Moore Stephens can introduce employers to providers of
electronic logbooks that use GPS technology to reduce the
More importantly, employers will require a rethink of how to
best structure the remuneration packages for their employees.
Questions employers will need to consider include:
Should we shut down novated lease programs?
How do we deal with the existing arrangements?
Moore Stephens can provide assistance in this regard through our
practical solutions & employee contribution strategies.
For further information on the above please contact the authors
or your Moore Stephens Relationship Partner.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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