Our focus
A fringe benefit is like a payment that an employer might make to an employee, but in a different form from salary or wages. For small businesses, providing private use of a work vehicle is one of the most common fringe benefits provided to employees.
If you provide a work vehicle to employees (or their family members or associates) for private use or it's available for private use, then the benefit arising from private use of the work vehicle may be subject to FBT.
If the vehicle is a car and is provided to employees (or their associates) for their private use or made available for private use, then it constitutes a car fringe benefit.
If the vehicle is not a car, and the employees (or their associates) use it for private purposes, then you may be providing a residual fringe benefit rather than a car fringe benefit.
Even a car garaged at an employee’s home is treated as available for their private use regardless of whether they have permission to use it privately. This means you may have an obligation to lodge an FBT return and pay FBT.
We’re focusing on employers who may not be meeting their FBT obligations in relation to work vehicles. Employers that do this may:
- fail to lodge an FBT return when they're required to do so
- mistakenly assume that private use of a dual cab ute is automatically exempt and doesn't attract FBT
- incorrectly claim vehicle exemptions
- not keep adequate records, such as valid logbooks to support the exemptions claimed
- incorrectly treat private use as business use, or avoid apportioning private use of a vehicle
- not keep accurate and valid records to substantiate their FBT position or support any exemptions they've claimed.
Not reporting or incorrectly reporting fringe benefits you provide to employees affects everyone. Meeting your employer obligations ensures fairness and a level playing field for all employers. When you do the right thing, it also helps your employees meet their tax obligations.
How to get it right
If you provide a work vehicle that is available for private use, you must first determine if it is a fringe benefit by:
- Identifying the type of motor vehicle provided.
- Understanding how the vehicle is used for business and private purposes, and accurately apportioning the usage.
- Correctly assessing if any exemptions apply to the vehicle or its private use.
- Keeping adequate records, such as logbooks and odometer readings, as well as records to support any exemption claims and calculations.
If you've identified that the private use of a work vehicle is a fringe benefit, you need to take the following steps to correctly calculate and report your FBT:
- Determine the taxable value of the car fringe benefit and calculate the FBT payable You can use the FBT car calculator to help you do this.
- Lodge your FBT return and pay the FBT amount owed by 21 May, or by 25 June if you use a tax agent.
- Check if you need to report the fringe benefit through Single Touch Payroll on an employee's income statement or on your employee's payment summary.
Private use of motor vehicles including the use of eligible commercial vehicles such as dual cab utes is an area we continue to focus on. We use sophisticated data and analytics to detect businesses that aren’t meeting their obligations. Our compliance teams are actively contacting businesses and employers that don't get it right or are deliberately avoiding their FBT obligations.
It's important to stay on top of your FBT obligations. Potential audit, penalties and interest charges may apply for employers who fail to comply with their obligations.
If you suspect a business is avoiding its obligations, you can report it to our Tax Integrity Centre.
Example: failure to report FBT correctly
Freya operates a restaurant and bar business, Juniper & Tonic Pty Ltd, in an inner-city area in Melbourne. The business has 3 luxury vehicles, 2 Porsches and a Mercedes, with a combined value of $618,078. These vehicles were allegedly used for travel between business locations and to purchase food and beverages for the restaurant.
Despite the use of high-value vehicles for business purposes, the company had not lodged any FBT returns since 2020.
An audit was conducted due to discrepancies identified in vehicle ownership and usage, combined with the absence of FBT lodgments. We found that:
- the company submitted logbooks to support business use of the vehicles, but these didn't record the minimum details required for each business journey and the logbooks were invalid and so they couldn't be relied upon for FBT purposes
- additional documentation was not provided to substantiate the use of the vehicles
- due to the lack of reliable records, the statutory formula method was applied to calculate the taxable value of the car fringe benefits.
We issued the business with:
- default assessments for the 4 income years, resulting in FBT payable of $461,000
- a 75% administrative penalty was applied, totalling $345,000
- General Interest Charge (GIC) of $132,000 was imposed
- total liability payable: $938,000.
The case highlights the importance of maintaining accurate and valid documentation to substantiate your claims and meet your FBT obligations, particularly when high-value assets are involved.
End of exampleKeep up to date
Keep your small business on track by staying up to date with the latest tax and compliance information. Learn more using our resources designed to help small businesses get it right:
- Download our factsheet, Car fringe benefits tax guide for small business (PDF, 415KB)This link will download a file.
- View our detailed FBT Guide for employers.
- Essentials to strengthen your small businessExternal Link – a suite of courses to help you build confidence in managing your obligations.
- Small business benchmarks – compare your performance against similar businesses in your industry.
You can also:
- Subscribe to our free Small business newsletter to get updates that might affect your business.
- Contact your tax professional to obtain advice specific to your business needs.