• Second method - car travelled 5,000 business kilometres or more

    • This method can't be used unless the car has travelled a minimum of 5,000 business kilometres during the year.
    • The employee must provide a declaration to you by the due date for lodging your annual FBT return or, where you are not required to lodge a return, by 21 May. You can find more information about the approved format for such a declaration in section 21.6.
    • Because the car has travelled a minimum of 5,000 business kilometres during the year, the percentage of business use is deemed to be 33 1/3% (the actual percentage of business use is irrelevant). You then use the deemed percentage of business use when applying the otherwise deductible rule, with step 2 modified as follows:

     

    Step

    Action

    1

    Ignoring any payment or contribution made by the employee, calculate the taxable value of the fringe benefit.

    2

    Multiply the step 1 amount by the deemed percentage of business use - that is, 33 1/3%.

    3

    Now look at any payment or contribution made by the employee. How much of this payment or contribution is allowable as an income tax deduction to the employee?

    4

    Subtract the actual deductible amount (step  3) from the hypothetical deductible amount (step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

      Last modified: 06 Dec 2011QC 17822