personal tax accountant sydney

How To Calculate Car Fringe Benefit?

Q&A Tax

Question :

On 1 April 2017, ABC Pty Ltd purchased a new company car at a cost of $40,000 including GST. The car
was registered and was to be used exclusively by Tom, the business manager, for private use for the
whole FBT year.

Calculate the FBT liability using both the statutory formula.

 

Answer :

The employer, ABC Ltd has provided a company car for Tom’s exclusive use. The car will be treated as
being available for Tom’s private use. A fringe benefit therefore arises even though the car is also used
by Tom for business or work-related travel.

Statutory formula method

The taxable value of a car fringe benefit under the statutory formula method is calculated as follows
(0.2 × Base Value of the car × Number of days the car fringe benefits were provided by the provider in
the FBT year)/(Total Number of days in that FBT year)-Employee contribution

Taxation value=($40,000 × 0.20 × 365)/365-=8000

FBT payable=Taxable value × Type 1 gross-up factor × FBT rate
=$8,000*2.0802*47%
=$7,821.55

The type 1 gross up factor has been used because in this scenario as the employer would be able to
claim GST input tax credits.

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