The amount that would otherwise be the taxable value of a car fringe benefit is reduced by the amount of any employee contribution.
An employee contribution may be either:
- an amount paid directly to you by the employee for use of the car - the employee contribution must be made from the employee's after-tax income and is included in your assessable income
- an amount paid by the employee to a third party for some of the car's operating costs (for example, fuel) and these contributions are not included in your assessable income.
However, the employee must provide you with documentary evidence of the expenditure (for example, receipts or invoices). In the case of petrol and oil costs, a declaration from the employee is sufficient for this purpose and receipts are not required. The declaration must be in a form approved by the Commissioner. For the approved declaration, refer to Declarations.
An employee contribution (other than a contribution of services as an employee) is treated as consideration for a taxable supply for GST purposes. Therefore, you have to pay GST on the supply. You reduce the taxable value of the fringe benefit by the GST-inclusive amount of the employee contribution.
An employee contribution does not have any GST implications for you if either:
- the contribution is made through payment of an amount by the employee for some of the car's operating costs (for example, fuel)
- you are neither registered nor required to be registered for GST.
In certain circumstances, journal entries in your accounts can be an employee contribution.
Example: Calculation using the operating cost method
A car purchased by an employer in January 2008 is used privately by an employee throughout the FBT year 1 April 2008 to 31 March 2009, and:
- operating costs (including GST, as appropriate) for that period (fuel, insurance, registration, repairs and so on) total $5,000
- the depreciated value at 1 April 2008 is $20,000, so that depreciation at 25% to 31 March 2009 would be $5,000 (that is, 25% of $20,000)
- the statutory interest rate is 9.00%, so that the interest component to 31 March 2009 would be $1,800 (that is, 9.00% of $20,000)
- the percentage of private use established under the procedures outlined above is 25%
- the employee spent $1,000 on fuel and has provided the required declaration to the employer.
The taxable value of the car fringe benefit for the 2008-09 FBT year would be:
A x B - C
- A = $11,800 (total operating costs), that is, $5,000 actual costs plus $5,000 deemed depreciation plus $1,800 deemed interest
- B = 25% (percentage of private use)
- C = $1,000 (amount of employee contribution).
Taxable value = ($11,800 x 25%) - $1,000 = $1,950