September 14, 2020
FBT and vehicles under COVID-19 restrictions
The pandemic period under which we labour continues to have outcomes that may at first have not been obvious, but as time and lodgement considerations come to pass, more taxation consequences edge their way out of the woodwork.
One such outcome is where employees have been garaging work cars at their homes due to COVID-19, and the affects this will have on employer fringe benefits tax (FBT) obligations.
The ATO has now clarified that an employer will not be taken to hold a car for the purposes of providing fringe benefits to an employee where a car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for maintenance purposes.
Under these circumstances, the ATO says that an employer that elects to use the operating cost method will have nil taxable value for the car — and no FBT liability. It maintains however that employers should maintain odometer records to show that the car was not driven during the period it was garaged.
If the car was driven for business purposes, the taxable value of the car fringe benefit may also be reduced to nil if the car is only being used for business travel, and the required logbook and odometer records for the period are kept.
It says that employers that do not apply the operating cost method or do not have odometer records must apply the statutory formula method. Under the statutory formula method, an FBT liability will arise as the car was garaged at an employee’s home and taken to be available for private use.
The ATO has also provided guidance on logbook requirements for car fringe benefits under the operating cost method where COVID-19 has impacted driving patterns, and:
- an existing logbook was in place
- driving patterns were affected during the time a logbook was being maintained, or
- it is the first time the operating cost method is being used or it is a logbook year for the car.