Tax and cars Part 3: FBT on cars
In this third part of our series we look at salary packaging and how providing a car to a team member can generate a fringe benefits tax liability for employers. For many business owners, it’s also part of a smart salary packaging strategy.
But when you give an employee access to a car for private use, the ATO may see that as a fringe benefit, and you may have to pay fringe benefits tax (FBT). One of the simplest ways to work out the taxable value is the statutory formula method.
In this blog, Westcourt – your local Perth tax accountant – will walk you through how the statutory formula method works, what’s included in the calculation, and why GST stays in the numbers even if you’re registered for it.
The statutory formula method in plain English:
The ATO’s formula looks like this:
Taxable value = (Base value × Statutory rate × Days available ÷ 365) − Employee contribution
Here’s what those terms mean in everyday language:
- Base value – The total cost of the car when you bought it. This includes GST, stamp duty, dealer delivery fees and accessories (like paint protection).
- Statutory rate – A flat 20% for all cars.
- Days available – How many days in the FBT year the car was available for private use (not when it was used).
- Employee contribution – If the employee chips in after tax to cover running costs, that reduces the taxable value.
The days available calculation is primarily based on the number of days the car is kept at the employee’s home overnight.
Toyota Camry
- Vehicle price: $50,000 (incl. GST)
- Stamp duty: $2,000
- Dealer delivery: $1,500
- Paint protection: $1,000
- Registration: $800
- CTP insurance: $600
Base value:
$50,000 + $2,000 + $1,500 + $1,000 = $54,500
Taxable value:
$54,500 × 20% = $10,900
Grossed-up value ≈ $22,362
FBT payable at 47% ≈ $10,636
Toyota Landcruiser
- Vehicle price: $100,000 (incl. GST)
- Stamp duty: $4,000
- Dealer delivery: $2,000
- Paint protection: $1,000
- Registration: $900
- CTP insurance: $700
Base value:
$100,000 + $4,000 + $2,000 + $1,000 = $107,000
Taxable value:
$107,000 × 20% = $21,400
Grossed-up value ≈ $44,512
FBT payable at 47% ≈ $20,920
How holidays can save you FBT
The “days available” part of the formula can save you money — if you can genuinely show the car wasn’t available for private use. If the employee goes on a 4-week holiday and leaves the car at work (locked up, keys secured, no access), those 28 days can be excluded from the calculation.
Camry — 4 weeks garaged at work:
- Days available = 365 − 28 = 337
- Taxable value = $54,500 × 20% × 337 ÷ 365 = $10,075
- Grossed-up value ≈ $20,957
- FBT payable ≈ $9,849
- Saving = $787
LandCruiser — 4 weeks garaged at work:
- Days available = 337
- Taxable value = $107,000 × 20% × 337 ÷ 365 = $19,814
- Grossed-up value ≈ $41,215
- FBT payable ≈ $19,371
- Saving = $1,549
If the cars were kept at home during the holiday, there’s no saving — they’re still counted as available for private use every day.
Is it worth it?
This question is not a simple answer, and the calculations for different clients can create different outcomes. If the Camry discussed above was owned by a boat manufacturer with a turnover of $30m, and the Camry had total running costs of $10k, the numbers would come out as follows:
Year | Tax Saved – GST and income Tax ($) | FBT Cost (Net of Tax) ($) | Net Benefit ($) |
1 | 12,106 | 7,460 | 4,647 |
2 | 6,401 | 7,460 | -1,058 |
3 | 5,702 | 7,460 | -1,757 |
4 | 5,177 | 7,460 | -2,281 |
5 | 4,784 | 4,973 | -189 |
In this case the net tax cost for owning the car over 5 years is $639 to the employer. And the calculation can change for each instance. We do a lot of these fringe benefits tax calculations for our clients, and the cost of the car, financing options, and tax profile of the employer can change the net outcome.
What business owners should remember:
- GST-inclusive base value — Even if you get the GST back on your BAS, it stays in the FBT calculation.
- Extras add up — Stamp duty, registration, dealer delivery, and accessories all increase the base value.
- Holiday garaging works — Reducing the “days available” can lower your FBT bill.
- Higher value = higher FBT — Expensive cars produce bigger FBT bills under the statutory formula method.
- Electric cars are exempt from fringe benefits tax.
- Other methods exist — the log book method might save you more.
How Westcourt can help:
At Westcourt, we work with business owners and families to structure salary packaging and car benefits in a tax-smart way.
We can:
- Calculate FBT under both methods to see which is cheaper for you.
- Help you set up holiday garaging arrangements with the right records.
- Review your current fleet for unnecessary FBT costs.
- Build salary packaging plans that work for both you and your team.
If you want to understand your FBT exposure — or make sure you’re not paying more than you should — speak with Westcourt, your Perth tax accountant for clear, practical advice.