taxing the benefits of vehicles
A car that is owned or leased by an employer, and made available to employees for private use, is considered a car fringe benefit. If the vehicle doesn’t meet the definition of a car, it may be considered a residual fringe benefit.
For Fringe Benefits Tax (FBT) purposes, a car is any of the following:
- a sedan or station wagon
- all other goods-carrying vehicle designed to carry less than one-tonne (including four-wheel drives)
- any other passenger carrying vehicle designed to carry fewer than nine passengers.
Private use of a car is on any day when an employee uses the car for private purposes, or is allowed to use it for private purposes. If the car is garaged at or near the employee’s home, even for security reasons, it is taken to be available for their private use, regardless of whether they have permission to use it privately. Generally, travel to and from work is considered private use of a vehicle.
The guide to FBT for small business on the ATO website has further information on record-keeping rules and exemptions. There is also a FBT car calculator to work out the taxable value.
novated lease arrangements
A novated lease arrangement is a way of providing car benefits by taking over all or part of your employee’s (the lessee’s) rights and obligations under a car lease agreement. This transfer of rights and obligations is agreed to in a deed of novation between the employer, the finance company and the lessee. The deed of novation usually contains a clause that transfers the lease obligations back to the lessee on termination of the lease or when the employee ceases employment with you. In the latter case, this enables the employee to enter into a new novated lease arrangement with another employer. More information can be found on the ATO website.
An employee’s use of a taxi, panel van, utility or other commercial vehicle (that is, one not designed principally to carry passengers) is exempt from FBT if the employee’s private use of such a vehicle is limited to:
- travel between home and work
- travel that’s incidental to work-related travel
- non-work related use that is minor, infrequent and irregular (e.g. occasional use to remove domestic rubbish)
- dual cabs qualify for the work-related use exemption if either:
- they are designed to carry a load of one tonne or more, or more than eight passenger
- while having a designed load capacity of less than one tonne, they’re not designed for the principal purpose of carrying passengers.
In some circumstances the employer does not need to report the use of a pool or shared car as a fringe benefit. For more details, go to the dedicated page on ATO’s website.
car parking benefits
A car parking fringe benefit may apply if the employer provides car parking to an employee that satisfies certain criteria:
- a car is parked at premises owned or leased by, or otherwise under the control of, the employer
- the car is parked for a total of more than four hours between 7am and 7pm on any day
- the car is owned by, leased to, or otherwise under the control of an employee, or is provided by the employer
- the parking is in respect of the employee’s employment
- the car is parked at or near the employee’s primary place of employment on that day
- the car is used by the employee to travel between home and work (or work and home) at least once on that day
- there is a commercial parking station within a one kilometre radius of the premises on which the car is parked, and that the all-day parking fee exceeds the car parking threshold as set out by the ATO.
Further information on parking benefits is available from the ATO website.
more articles about: pay and reward
- termination schemes
- employee share schemes (ESS)
- employed or self-employed?
- minimum wage
- salary sacrifice
- living-away-from-home allowances (LAFHA)
- working outside Australia
- key dates for your tax diary
- workers compensation insurance premiums
- trends and predictions for pay and reward
- principles of rewarding employees
- different generations – different motivations
- fringe benefits tax
- taxing the benefits of vehicles
- employers’ responsibility for tax and superannuation
- establishing the right reward system
- overtime, penalty rates and loadings
- pay: not the only reward