ATO luxury car tax cost base

A car fringe benefit is calculated by either of the Operating Cost or Statutory Formula methods, or in the case of expense reimbursements the private use portion of the expense.

The taxable fringe benefit is reduced by the amount of any employee contributions.

Under the operating cost method, the taxable value of the fringe benefit is based on a private percentage of the vehicle’s total operating costs which include:

Log Book

To determine the business/private percentage under the operating cost method, a log book is required to be kept over a continuous 12 week period and renewed after 5 years, or earlier if required. The log book is to be submitted to the employer.

The vehicle cost for depreciation purposes includes dealer delivery charges, GST and customs duty if applicable.

The cost also includes non-business accessories, and the depreciation cost limit does not apply. (See TR 2011/3)

The diminishing value depreciation percentage rate to be used is determined from the date of purchase according to the following table:

The interest component of an owned vehicle cost is determined by a benchmark interest rate which is adjusted and announced annually in a Tax determination before the beginning of the FBT year.

Taxable value = [Total vehicle costs (including depreciation and imputed interest where the vehicle is owned)] x Private use percentage LESS Employee contributions

The statutory formula method determines a taxable value from a statutory percentage of the car’s cost. The percentage is based upon the total number of kilometres travelled during the year.

This method requires that the following data be obtainedi:

The taxable value of the benefit is reduced by the amount of employee contributions.

The statutory percentage to be applied will depend on whether the provision of the car benefit is under a pre-existing commitment on or before 10 May 2011.