Changes to Car Fringe Benefits

Dated: October 2011

If an employee received a car fringe benefit, the amount of fringe benefits tax that applied to that arrangement can be calculated using one of two methods – statutory formula or cost.

The statutory formula operated in such a way that the amount of fringe benefits tax payable reduced as the number of kilometers the car travelled in the year increased.

As part of its 2011/12 Budget, the Government announced that this sliding scale will be replaced with a single rate (20%), regardless of the distance travelled during the year.

This change affects all vehicles purchased under contracts commencing after 7.30pm AEST 10 May 2011.

There is a phase-in period of 4 years to get from the current rates to the flat 20% rate as follows:

Distance Travelled During FBT Year	Statutory rate (multiplied by the cost of the car)
	Existing contracts	New contracts entered into after 7:30am, 10 May
		From 10 May 2011	From 1 April 2012	From 1 April 2013	From 1 April 2014
0 – 15,000 km	0.26	0.20	0.20	0.20	0.20
15,000 – 25,000 km	0.20	0.20	0.20	0.20	0.20
25,000 – 40,000 km	0.11	0.14	0.17	0.20	0.20
40,000 + km	0.07	0.10	0.13	0.17	0.20

These new arrangements will produce mixed results – reduced benefits for high mileage vehicles but increased benefits for low mileage vehicles.

As the rates change each year, it will be important to ensure that calculations are done correctly for each vehicle each year.

If you are not doing it already, it would also be prudent to consider getting a log book done where a vehicle’s kilometers are mainly business related and compare the results under both calculation methods (statutory formula and operating cost). Only then can you ensure that the minimum amount of fringe benefits tax is paid.