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What is Fringe Benefit Tax (FBT)?

Gradual changes to the statutory calculation of Fringe Benefit Tax (FBT) over the past five years have had serious cost implications for your business. Here are the answers to the most often-asked questions regarding what the legislation means to you.

Q: What is Fringe Benefits Tax?
A: Australian businesses are liable for Fringe Benefits Tax (FBT) on certain benefits they provide to their employees. This includes vehicles. The benefit may be in addition to, or part of, a salary package.

Q: What vehicles is Fringe Benefits Tax paid on?
A: FBT is paid on all work vehicles that are also made available for private use. This includes cars, station wagons, SUVs, utility vehicles, panel vans, people movers and some mini buses. Vehicles designed to carry more than a ton, or more than nine passengers, are exempt.

Q: What is considered ‘private use’?
A: A vehicle is determined to be made available for private use if employees use it for private purposes – whether they have permission to or not. For example, travel to and from work is generally considered private use.

Q: What is the most effective method for determining Fringe Benefits Tax liability?
A: There are two ways to determine FBT liability:

  • Keeping a logbook to track operating cost for each vehicle; or
  • Using a standard calculation known as statutory fraction

Keeping a manual logbook is an onerous task, so many businesses have historically relied on statutory fraction. But in 2011, Australia's Future Tax System Review introduced a flat rate of 20 per cent, which was phased in gradually over three years. This meant FBT effectively trebled for a vehicle travelling more than 40,000 kilometres a year.

Using Teletrac Navman’s Electronic Log book (ELB), which is approved by the Australian Taxation Office, you can collect all relevant information from your fleet in real-time. This enables you to share the report and easily calculate FBT based on operational costs, at the push of a button, delivering very significant savings.

Q: How does managing FBT with an electronic logbook work?
A: With Teletrac Navman’s DIRECTOR, as soon as a driver starts a vehicle’s engine they identify themselves using a PIN number, before selecting the purpose of the trip. The logbook entry is now complete and gets fed into your FBT report at the end of the journey, so you can submit it to the ATO.

Q: What are the benefits of using an Electronic Log Book instead of relying on statutory fraction?
A: DIRECTOR makes it easy to collect, assess and process information to prove business and private usage of your vehicles. Here are some of the biggest benefits for your organisation:

  • Minimise FBT liability by clearly establishing maximum business use over any given three-month period
  • Accurate, real-time data will eliminate concerns of logbooks being voided by the ATO
  • Gain greater visibility into your fleet and develop a more detailed understanding of operating costs
  • Reduce back-office administration costs and minimise the hassle of managing paper logbooks

Q: If I’m using an EWD to manage Fringe Benefits Tax, can I just replace my paper logbook altogether?
A: A certified EWD solution can be used to record work and rest diaries, but a written work diary is also legally required. From 2017, transport operators will be able to replace paper diaries with electronic work diaries.