FBT, Car Parking and the Otherwise Deductible Rule

Car fringe benefit: The statutory formula method under s 9 FBT Act calculates the taxable value as: (A × B × C) / D - E, where A is the car's cost base (GST-inclusive), B is the statutory fraction (0.20 for 2024), C is the number of days the car is available for private use, D is the number of days in the FBT year (366 for 2024 leap year? 2024 is a leap year, so 366), and E is the employee contribution. A = AUD 44,000. B = 0.20. C = 300. D = 366. E = AUD 2,000. Taxable value = (44,000 × 0.20 × 300) / 366 - 2,000 = (2,640,000) / 366 - 2,000 = 7,213.11 - 2,000 = AUD 5,213.11. The statutory formula method is available if the car is not used for taxi or hire car, and the company uses the method. The operating cost method may be more favourable if the business use percentage is high. To calculate the operating cost method, we need the total operating costs (fuel, repairs, insurance, registration, depreciation, etc.) and the business use percentage based on the logbook. The odometer readings show 15,000 km travelled during the year. The business use percentage is not given; we need a logbook. If the business use percentage is, say, 80%, the taxable value under the operating cost method = total operating costs × (1 - business use%) - employee contribution. Without the logbook and operating costs, we cannot calculate. The company should obtain a valid logbook and calculate the operating cost method to compare. If the business use percentage is high (e.g., above 80%), the operating cost method may produce a lower taxable value. The company can choose the method that gives the lower taxable value. The statutory formula method is simpler but may not be optimal. The answer should note that the statutory fraction for 2024 is 0.20 because the car travelled less than 15,000 km? Actually the statutory fraction depends on the total kilometres travelled during the year: 0.26 for less than 15,000 km, 0.20 for 15,000 to 24,999 km, 0.11 for 25,000 to 39,999 km, and 0.07 for 40,000 km or more. The odometer readings show 15,000 km travelled (25,000 - 10,000), so the fraction is 0.20. If the car travelled exactly 15,000 km, the fraction is 0.20. So the calculation is correct. The employee contribution of AUD 2,000 reduces the taxable value. The taxable value is AUD 5,213.11. The FBT payable is taxable value × 2.0802 (gross-up rate for type 1 benefits) × 47% = 5,213.11 × 2.0802 × 0.47 = AUD 5,096. The company can claim a GST credit on the car? The car is a luxury car? The cost is AUD 44,000, which is below the luxury car tax threshold (AUD 89,332 for 2024), so no LCT. The company can claim input tax credits on the car to the extent of business use. The FBT gross-up rate for type 1 benefits is 2.0802. The answer should also mention the otherwise deductible rule does not apply to cars. The operating cost method may be more favourable if the business use percentage is high, but the company needs a logbook. The answer should advise the company to keep a logbook and compare.

Car parking: The provision of a parking space to an employee is a car parking fringe benefit if the conditions are met: the car is parked at premises owned or leased by the employer, the parking is provided to the employee, the employee has a car, and the parking is available for more than 4 hours on a day. The car parking benefit is a type 1 benefit if the employer can claim a GST credit. The taxable value is the commercial parking station rate or the employer's cost. The company pays AUD 500 per month to a commercial parking station, so the taxable value may be based on the commercial rate. The otherwise deductible rule does not apply to car parking benefits because the employee cannot claim a deduction for parking. However, there is an exemption for parking provided to employees who are not in a car parking fringe benefit? The small business exemption does not apply because turnover is AUD 50 million. The car parking benefit is taxable. The taxable value is the lower of the commercial parking station rate and the employer's cost? The taxable value under s 39 FBT Act is the commercial parking station rate, or if the employer provides the parking under a lease, the cost to the employer. The company pays AUD 500 per month, so the annual cost is AUD 6,000. The CEO uses the space for 200 days, but the benefit is provided for the whole year? The taxable value is the cost to the employer, which is AUD 6,000, reduced by any employee contribution. The otherwise deductible rule does not apply. The FBT is payable on AUD 6,000. The company can claim a GST credit on the parking cost if it is a taxable supply. The loan: The loan is a loan fringe benefit under s 16 FBT Act. The taxable value is the difference between the statutory interest rate and the actual interest rate, multiplied by the loan amount. The statutory interest rate for 2024 is 7.5%. The actual rate is 3%. The difference is 4.5%. The taxable value = AUD 50,000 × 4.5% = AUD 2,250. The otherwise deductible rule may apply if the employee would have been entitled to a deduction for the interest if they had borrowed the money directly. The loan is used to purchase a home, which is a private asset, so the interest would not be deductible. Therefore, the otherwise deductible rule does not apply. The taxable value is AUD 2,250. The loan is a type 2 benefit? The loan is a financial supply, so the company cannot claim GST credits? The loan is a type 2 benefit, so the gross-up rate is 1.8868. The FBT is AUD 2,250 × 1.8868 × 47% = AUD 1,995. The health insurance reimbursement: The reimbursement of private health insurance is an expense payment fringe benefit. The taxable value is the amount reimbursed, AUD 3,000. The otherwise deductible rule does not apply because the employee cannot claim a deduction for private health insurance. The benefit is a type 1 benefit if the company can claim a GST credit on the health insurance? Health insurance is GST-free, so no GST credit. The benefit is a type 2 benefit. The FBT is AUD 3,000 × 1.8868 × 47% = AUD 2,660. The company should consider whether the health insurance is provided under a salary sacrifice arrangement, which may affect the FBT. The answer should also mention the FBT exemption for portable electronic devices, but not relevant. The company should also consider the FBT rebate for public benevolent institutions, but not relevant. The company should calculate the total FBT payable and consider whether to provide benefits as salary instead. The otherwise deductible rule does not apply to any of these benefits because the employees would not be entitled to deductions. The answer should note that the car parking benefit may be exempt if the parking is provided to an employee with a disability, but not relevant. The company should also consider the FBT instalment rules.