Employee cars - applying the 'otherwise deductible' rule



This information forms Chapter 21 of Fringe benefits tax - a guide for employers.

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

End of attention

Various chapters in this guide describe a four-step procedure for calculating the reduction available under the otherwise deductible rule. Step 2 of the four-step procedure is calculating an amount that hypothetically would have been allowable as an income tax deduction to the employee. However, you have to use a different step 2 where the costs of operating the employee's own car are involved. Three methods are available, with different substantiation requirements and varying results.

    Last modified: 06 Dec 2011QC 17822