The Australian Taxation Office (ATO) issued guidance (a fact sheet) that provides an overview of how it will administer the fringe benefits tax (FBT) measures when the circumstances in which an employer provides a car fringe benefit have been affected by the coronavirus (COVID-19) pandemic.
The ATO fact sheet emphasizes that if the employer is using the statutory formula method to calculate the taxable value of the car fringe benefit, then a taxable benefit will generally arise on each day when the car is garaged at the employee’s residence—even if the employee does not use the car on that day. In other words, if employees are not using a car in the way that they usually would because of COVID-19 restrictions, a liability for FBT can still arise.
The fact sheet also explains the possibilities for the employer to better manage the FBT position by using the operating cost or “logbook” method of calculating the taxable value of the car benefit. In this situation, the ATO will accept that the car has not been held for the purpose of providing fringe benefits for any period when the employee does not drive the car at all, or only drives it briefly to keep it in working order. The employer would need to obtain odometer records in order to evidence this.
According to the fact sheet, a new logbook could be completed for the FBT year ending 31 March 2021, even if the employer already has a valid logbook for the car from an earlier FBT year. This could be beneficial when COVID-19 restrictions have caused a reduction in the private use of the car compared to the logbook year. However at the time, the employer prepares the FBT return for 2020-21, it will need to form a view on whether the information from the 12-week logbook is representative of the business use percentage for the full year, and if necessary adjust the percentage shown by the logbook.
Employers need to review their car fleet to identify any that may be exempt from FBT when the private use (excluding home to work travel) is minor, infrequent, and irregular.