Providing an employee with a work car for business use is common, and it can be a great way to advertise your business or services. However, if the car is used or available for private use by an employee (including their families or associates), FBT may apply.
Understanding how FBT applies to your circumstances can help you meet your obligations with confidence and avoid unexpected liabilities.
Are you providing a 'car' fringe benefit?
For FBT purposes, a 'car' is defined as a:
- sedan or station wagon
- goods-carrying vehicle with a carrying capacity of less than one tonne (such as a panel van, many 4-wheel drives and some utes), or
- passenger-carrying vehicle designed to carry fewer than 9 passengers.
If you provide a car to your employees, the next step is to understand whether it's being used for personal purposes.
Is the car being used privately?
Are your employees using the car for travel or activities not related to their employment, for example:
- doing school pick-ups or drop-offs (even if it's on the way to or from work)
- running personal errands
- transporting family or friends
- garaging the car at or near the employee's home (even for security reasons)
- taking it on weekend recreational trips.
FBT applies when a work car is used or made available for private use, so you need to know how your employees use the car.
Are you keeping records?
Whether your employees use a work car for private reasons or not, you need to be keeping accurate records to support your FBT position and to show how you calculate the taxable value of a car fringe benefit.
If you're using the operating cost method, you need to be keeping records such as logbooks and odometer readings. If you're using the statutory formula method, ensure you have records such as purchase records, invoices, receipts and lease documents.
Need help?
If you're unsure whether FBT applies, there's a range of resources available to help you understand your FBT obligations and what you may need to do:
- see our Car fringe benefits tax guide (PDF, 414KB)This link will download a file
- take the free Car fringe benefit tax course on Essentials to strengthen your small businessExternal Link
- speak with your registered tax professional.
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