Logbook Requirements for Fringe Benefits Tax
If you provide a car to your employees for their private use, you may be subject to Fringe Benefits Tax (FBT). FBT is a tax paid on certain non-cash benefits provided to employees or their associates in respect of their employment. One of the most common types of FBT is a car fringe benefit, which is when an employer provides a car to an employee for their personal use. The employer is then required to pay FBT based on the taxable value of the car fringe benefit.
The Australian Taxation Office (ATO) requires many businesses to maintain a logbook to determine the usage of a vehicle for Fringe Benefits Tax (FBT) purposes. A logbook is a written record of all business-related car trips taken over a 12-week period. In this post, we will focus on the logbook requirements for FBT.
What is a logbook?
A logbook is a daily logbook (or similar document) used to support the purported ‘business use percentage’ of a car when calculating the taxable value of car fringe benefits under the Operating cost method. An employer (and, by extension, an employee) is generally required to maintain a valid logbook over 12 weeks that represents the car’s pattern of use in the FBT year, where the car has been held for less than 12 weeks, then the logbook period should cover the car’s entire holding period (instead of 12 weeks, as is ordinarily the case). A new logbook is needed at least once every five years.
Logbook entries
In preparing the logbook, the individuals must ensure each business journey is undertaken during the ‘logbook period.’
These entries should contain the following details:
- The date on which each journey begins and ends.
- The car odometer readings at the beginning and end of each journey.
- The number of kilometres travelled in the course of each journey.
- The purpose of each journey.
Entries in the logbook should sufficiently describe the purpose of the journey so it can be clearly determined as either business or private – not just ‘business’ or ‘miscellaneous business’.
Keep a separate logbook for each car.
You record the odometer reading at the start of the FBT year, 1 April — then you record the reading at the end of the FBT year, 31 March.
Key Takeaway:
- The ATO will differentiate between vehicles that meet their definition of a car and workhorse vehicles with a carrying capacity of more than 1 tonne that has minor and infrequent personal use. Some dual cab utilities will be defined as cars under these rules .
- If your vehicle is defined as a car, then it will not be exempt from FBT unless there is a log book that shows 100% business use.
- In the absence of a logbook , the FBT for a company car is worked out by using the statutory formula which is 20% of the purchase value of the vehicle. This can be significantly more for new cars with minor business use.
If you need help determining the best method for your business, MKG Partners can assist you. Contact us to find out how we can help you maximize your motor vehicle expense claims.
