Covid-19 and Car Fringe Benefits
What is a Fringe Benefit?
A fringe benefit is a benefit provided during the year of tax by an employer, associate or third-party arranger to an employee or an associate in respect of the employment of the employee.
What is Benefit?
Benefit includes rights, privileges, services or facility provided under an arrangement in relation to the performance of work, i.e. a benefit is a ‘payment’ to an employee in a different form to salary or wages. It can be something for you, your spouse or your child.
Meaning of Employer
The definition of employer includes current, former and future employers. Benefits provided by an associate of the employer may also qualify as a fringe benefit provided by the employer.
Who is Employee?
An employee is a person who is, was, or will be entitled, to receive salary or wages, or benefits in lieu of salary and wages.
“Benefit” must be in respect of the employment of the employee
To qualify as a fringe benefit, the benefit must be provided ‘by reason of, by virtue of or in relation directly or indirectly to, that employment. It must be established whether there is a sufficient or material connection or relationship between the benefit and the employment.
Car Fringe Benefits
This benefit arises where an employer provides a car for an employee’s private use, or it is available, or deemed to be available, to the employee or associate for private purpose.
What is a “Car”
A car is defined as a motor vehicle (including four-wheel drives, station wagons, panel vans, utility trucks or other similar vehicles) designed to carry a load of less than 1 tonne or fewer than 9 passengers.
What is “Private Use”?
Private use means any use of the motor vehicle by the employee or associate that is not exclusively in the course of producing assessable income of the employee.
Travel between home and the employee’s place of employment is an example of private use.
Where a car is garaged at or near the employee’s residence, it is taken to be made available for private use by the employee or associate and a car fringe benefit will arise. It does not matter whether the employee actually uses the car for private purposes, as long as the car is available for private use.
COVID-19 and Car Fringe Benefits
If a home-garaged car is not being driven
If a car has been garaged at home and not been driven at all or driven merely for the purpose of maintaining the car, it is considered not to be held for the purpose of providing fringe benefits to employee.
In these situations, there will be a nil taxable value for the car and no FBT liability provided you elect to use the operating cost method and maintain odometer records.
If a home-garaged car is being driven
If a car has been garaged at home and employee is driving the for business purposes, you may be able to reduce the taxable value of the car fringe benefit using the operating cost method.
You will only able to reduce the taxable value if you have logbook records and odometer records for the said period.
More Information
For further information how to calculate car FBT using Operating costs method and Statutory method, watch the ATO video series at https://publish.viostream.com/play/c-n94teq1
For more information regarding COVID-19 and Car Fringe Benefits, https://www.ato.gov.au/law/view/pdf/afs/afs-car-fbt-covid-19.pdf
Contact us
For more information, please do not hesitate to contact our office.
