8.10 Reduction in taxable value where interest that would have been deductible to the employee is incurred in relation to a car

Where a loan fringe benefit is provided in relation to a car owned or leased by the employee, there are special rules for determining how much, if any, of your expenditure would have been 'otherwise deductible' to the employee.

These special rules are actually three different methods of calculating the amount of interest that hypothetically would have been income tax deductible to the employee (that is, step 3 in the six-step procedure explained in section 8.8). The differences arise from the extent to which the car is used for business or employment-related purposes, and/or the type of evidence available to substantiate that use.

The first method is substantiated by means of log book records and/or odometer records. The second and third methods are substantiated by an employee declaration only. For full details and the appropriate declaration, refer to Employee cars - applying the 'otherwise deductible' rule.

The employee declaration shown in section 8.9 is not suitable to be used for a loan related to a car.

    Last modified: 03 Jul 2012QC 17821