Fringe Benefits Tax is payable by employers on certain benefits provided to employees. It’s applicable to vehicles that are made available to drivers for private use. This use can be tracked through an electronic logbook or manually through a standard calculation.
FBT can have serious cost implications for your fleet thanks to gradual changes to statutory regulations over the last five years, so it’s important to maintain accurate reporting.
What is Fringe Benefits Tax and what is it paid on?
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. It’s separate to income tax and is calculated on the value of the fringe benefits offered.
FBT is paid on all work vehicles that are also made available for private use, provided they have a carrying capacity of less than one tonne or fewer than nine passengers. This includes cars, station wagons, SUVs, utes, panel vans, people movers and some mini buses.
What is considered ‘private use’?
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 directly to and from work is considered private use and is therefore taxable. With strict rules stating personal use must be less than 15km per week on average to stay under the tax threshold, it’s important to have a clear view of your fleet.
Are there any limits on private use?
In 2018, strict new limits were put in place by the Australian Tax Office, which means that utes, cars and other vehicles will now attract fringe benefit tax unless they are only used to travel between work and home with no diversions that add up to more than 2km per trip. These exceptions also apply if multiple journeys for private use account for no more than 750km for each FBT year; if no single return journey for a private purpose exceeds 200km; or if the vehicle has non-business accessories.
What else has changed with FBT legislation?
As of March 2018, the overall FBT rate is now 47 per cent, with gross up rates changing accordingly. This new legislation also means that Centrelink will be using 100 per cent of the Reportable Fringe Benefits Amount (RFBA) to determine some family benefit payments (except for non-profits), and that there are now stricter limits on private use for employer-owned vehicles.
What is the most effective method for calculating Fringe Benefits Tax liability?
There are two ways to determine your business’ FBT liability – keeping a logbook to track operating costs for each vehicle or using a standard calculation known as a statutory fraction.
Yet, maintaining a manual logbook is an onerous task and leaves you open to human error, so many businesses commonly rely on statutory fraction. However as of 2011, a flat rate of 20 per cent applies when using this method, regardless of the distance travelled, which means businesses can end up paying a lot more than required.
In comparison, using an electronic logbook approved by the Australian Taxation Office means you can collect all relevant information from your fleet in real-time. It also enables you to share the report and easily calculate FBT based on operational costs at the push of a button, delivering significant savings.
How does managing FBT with an electronic logbook work?
An electronic logbook begins recording trip data as soon as a driver starts the vehicle’s engine and allows them to identify themselves using a PIN number. From here, they can select the purpose of the trip and begin tracking their journey. The logbook entry is then completed and fed into an FBT report at the end of the journey that can be shared with the ATO.
What are the benefits of using an electronic logbook instead of relying on statutory fraction?
An electronic logbook makes it easier to collect, assess and process information to prove business and private usage of your vehicles. The data provided is far more accurate than using statutory fraction and allows for real-time feedback.
Some of the biggest benefits of using an electronic logbook to track private use include:
- Minimising FBT liability by clearly establishing maximum business use over any given three-month period
- Having access to accurate, real time data that eliminates concerns about logbooks being voided by the ATO
- Gaining greater visibility into your fleet and developing a more detailed understanding of operating costs
- Reducing back-office administration costs and the hassle of paper logbooks
If I’m using an electronic logbook to manage Fringe Benefits Tax, can I just replace my paper logbook altogether?
An electronic logbook can effectively replace a paper logbook with no need to keep a hard copy of the information contained in the device unless stipulated by a specific law or regulation in your industry. This reduces the paperwork required to be completed by drivers and streamlines back office processes.