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How do I calculate Fringe Benefits Tax?

How do I calculate Fringe Benefits Tax?

Fringe Benefits Tax (FBT) is calculated via two standard methods, either the statutory fraction or using a logbook. While the statutory fraction is the most common, the logbook method is much more precise. However, using a manual logbook still leaves you prone to inefficiencies.

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FBT is the tax an employer pays for benefits provided to employees that aren’t necessarily included in their wages or salary. This can include things like training and sick leave. If you operate a fleet of vehicles and allow employees access to these vehicles for private use, you are liable for FBT.

Collecting, differentiating and calculating work and private usage can be tricky. You need the right tools to maximise your refund without the hassle.

Who does FBT apply to?

FBT is paid on all private use of work vehicles, whether it’s cars, utes, station wagons, SUVs, utility vehicles, vans, people movers or mini buses. Private use is any activity an employee does with a work vehicle that isn’t work related, such as travelling to and from work.

Rates and thresholds, as well as which vehicles are liable, vary over time so it’s important to check the current rates from the Australian Taxation Office (ATO). This is especially important for businesses who are claiming FBT for the first time due to changes in ATO standards.

How is FBT calculated?

There are two standard ways businesses currently determine FBT:

  • Using a formula known as the statutory fraction method
  • Tracking work and private operation use for each vehicle via a logbook

The statutory fraction method is more common due to the tedious process of keeping a manual logbook. However, it is based on a flat rate of 20 per cent which means often you’re paying more than required.

While the manual logbook process seems like it will offer you a more accurate representation, factors such as human error, miscalculation, guesswork and damaged or lost paperwork make it an inefficient and inaccurate method. It’s also time-consuming to manually decipher and enter each drivers’ private usage into a report to then be assessed by the ATO. This often leads to businesses paying too much in FBT due to being forced into using the flat rate.

With an electronic logbook this process can be done automatically, with the data being collected and compiled as soon as it’s received from the driver. This not means you get the right information every time but also makes the entire process of calculating FBT far easier.

    What is an electronic logbook?

    Teletrac Navman’s electronic workbook is an ATO approved platform that captures data from your vehicles in real-time. It allows you to accurately record work and private use. Drivers simply put in a unique PIN and select the purpose of their trip at the start of every job. That data is then fed back to the main office system and compiled into an easy-to-read report that’s ready for submission to the ATO. It removes the guesswork of determining private vehicle use and gives you the most accurate data needed to claim the right FBT refund across your entire fleet.

    The electronic workbook gives you greater visibility into how your drivers operate on the road while reducing back office admin to maintain paper logbooks. It’s an easier and more accurate approach to the FBT process.

     

    FBT doesn’t need to be a strenuous process of combing through months of driver logbooks or relying on a formula that leaves you out of pocket. By letting telematics do the thinking you’re better equipped to minimise FBT liability and understand your fleet’s activities.

     

    Explore Further

    Tips For Maximising Your FBT Refund

    Tips For Maximising Your FBT Refund

    While the statutory fraction method is a common and simplified approach for calculating your Fringe Benefits Tax (FBT) return, defaulting to the 20 per cent flat rate means you might be paying more than you need to.

    Manage utes for work? You need to think about Fringe Benefit Tax

    Manage utes for work? You need to think about Fringe Benefit Tax

    As tax time edges closer, it’s important to know the different kinds of tax you’re liable for so you can avoid penalties. One you may need to think about for the first time is Fringe Benefits Tax (FBT).