Car Fringe Benefits Tax - Employers’ Guide
Employers commonly provide certain perks of the job to employees, like a phone, company car, or even things such as paying for their gym memberships. In Australia, Fringe Benefits Tax (FBT) is a way of ensuring that any non-monetary benefits received by employees are taxed appropriately.
How does car FBT work?
FBT is only concerned about the private or personal component of employee perks, so for company cars, FBT only applies to the number of days through the year that the employee had exclusive access to the car for private use.
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When is FBT paid for company vehicles?
Unlike the income tax year, which is usually calculated from 1st July to 30th June, fringe benefits tax is calculated from 1st April to 31st March. FBT is then due on the 21st of May of that year, unless the 21st falls on a weekend or public holiday, at which time it will be delayed to the next business day. For 2023, FBT was due on the 22nd of May.
Vehicles exempt from Fringe Benefits Tax
Car FBT only applies to the private use of a company vehicle, so if there is limited private use, such as travelling between home and work or there is infrequent and irregular usage, then FBT isn’t applicable.
There are also certain vehicles exempt from FBT on cars, including:
- Single cab utes
- Dual cab utes, 4WDs or any other road vehicle that can carry over 1 tonne or carry more than 8 passengers, including the driver.
- Panel vans or goods vans
- Modified vehicles, such as a hearse, where the modification permanently changes the design of the vehicle
For more information about which vehicles are exempt from FBT, refer to the ATO website.
From the 1st July, 2022, electric cars that meet the eligibility requirements are also exempt from company car FBT. To be eligible, zero or low-emissions vehicles must be either battery electric, hydrogen fuel cell electric or plug-in hybrid electric, and designed to carry a load of less than 1 tonne and fewer than 9 passengers.
If Luxury Car Tax (LCT) was payable on the import or sale of the car, then it is not eligible for the FBT exemption. Electric motorcycles and scooters do not qualify for the exemption and plug-in hybrid electric vehicles will not be eligible for the FBT exemption from 1st April, 2025.
How is car FBT calculated?
FBT is calculated on a company car based on the number of days that the employee had exclusive access to the car for private use throughout the year. The company is then taxed at 47% on the total private cost component.
Because of the high taxation rate for FBT, unless the employee is in the highest tax bracket and using the car predominantly for private use, it is normally cheaper for a company to pay a generous car allowance to an employee rather than provide a company car. Employees who earn over $180,000 are taxed at the same rate of 47% as FBT.
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