• Operating cost method records

    Calculating and substantiating the percentage of business use

    If you use the operating cost method to calculate the taxable value of a car fringe benefit, you have to calculate the percentage of business use of the car and keep records that substantiate the percentage of business use.

    Because logbook records are normally maintained for only 12 weeks, take care in estimating the percentage of business use of the car. The estimate must take into account the information in the logbook records and the odometer records, as well as any variations in the pattern of business use throughout the year.

    The percentage of business use of a car is calculated as:

      A    x  100%
      B

    Where:

    • A = your estimate of business kilometres travelled by the car during the FBT year (or part-year, as the case may be)
    • B = the total kilometres (both business and private) actually travelled by the car during the same period.

    Estimating the business kilometres travelled in a logbook year

    In estimating the business kilometres travelled in a logbook year, you must:

    • keep a logbook recording details of business journeys undertaken in the car for a continuous period of at least 12 weeks (the logbook period must also be recorded in the logbook)
    • keep odometer records of the total kilometres travelled during that period
    • keep odometer records of the total kilometres travelled during the year
    • estimate the number of business kilometres travelled during the full FBT year (or part-year, if appropriate)
    • take into account all relevant matters, including logbook, odometer and any other records you keep, and any variations in the pattern of business use throughout the year due to things like holidays or seasonal factors.

    Estimating the business kilometres travelled in a non-logbook year

    In estimating the business kilometres travelled in a non-logbook year, you must:

    • keep odometer records of the total kilometres travelled during the year (or part-year, if appropriate)
    • estimate the number of business kilometres travelled during the full FBT year (or part-year, if appropriate)
    • take into account all relevant matters, including logbook, odometer and any other records you keep, and any variations in the pattern of business use throughout the year due to things like holidays or seasonal factors.

    Replacement cars

    If you replace a car during the year, you may treat the replacement car as though it were the replaced car for the purposes of complying with the requirements of the operating cost method.

    If you maintained logbooks and odometer records during the year or in a previous year, you may transfer that percentage to the new car (if it remains appropriate) when estimating a business percentage for the replaced car.

    The transfer of a business percentage in this way is conditional on you recording in your business records the make, model and registration number of both cars and the date on which the replacement was made. These entries must be made before the due date for lodging your annual FBT return or, if you do not have to lodge a return, by 21 May. Odometer records you keep for the cars during the replacement year must show details of the odometer readings of both the replaced car and the new car on the replacement date.

    Logbook year

    A year is a logbook year if one of the following applies:

    • none of the previous four years was a logbook year of tax for that car
    • you elect to treat the year as a logbook year (for example, to increase the nominated percentage of business travel)
    • the Commissioner of Taxation, by written notice, requires you to treat the year as a logbook year.
      Last modified: 08 May 2012QC 17818