The ATO recently worked with various industry representatives to develop a safe harbour guideline for employers when calculating the taxable value of certain car fringe benefits.
The guideline is designed to ease the burden of compliance for employers that have fleets of 20 or more cars when calculating the business use percentage of car fringe benefits. Employers can use this new simplified approach if they have:
a fleet of 20 or more “tools of trade” cars, which are not part of salary packaging arrangements and cost less than the luxury car tax limit when acquired
a mandatory logbook policy and hold valid logbooks for at least 75% of the cars in the logbook year.
The new approach reduces the recordkeeping burden and allows employers to use an “average business use percentage” when using the operating cost method.
How it works
Employers can now establish an “average business use percentage” which can be applied to the whole fleet over five years.
The process required to calculate the percentage consists of:
gathering all log books kept for each car in the fleet
determining which of those log books are valid and then confirming that valid logbooks exist for at least 75% of the cars in the fleet
calculating the average of the business use percentages based on the logbook data.
The simplified record-keeping approach can be applied for a period of five years in respect of the fleet (including replacement and new cars) provided the fleet remains at 20 cars or more. It also relies on there also being no significant change in circumstances, such as a change in employer’s depot location which would alter the business use percentage of the fleet.
Please contact us if you would like to know more about how this new guideline can be applied in your business.