An employer works out the Car Fringe Benefits Tax Liability one of two ways:

• The Statutory Formula Method

• The Operating Cost Method

The statutory formula method determines an employer’s FBT liability based on a fixed percentage of the cost of the car (including GST) every year (generally 20% for cars acquired after 20 May 2011), while the operating cost method determines an employer’s FBT liability based on the private use percentage of the car and its operating costs (including deemed depreciation and interest where the car is owned by the employer).

The operating cost method generally provides a better outcome where there is minimal private use of the car.

While both methods require odometer reading at the start and end of the FBT Year (ie the year ended 31 March), the operating cost method also requires that a logbook is maintained for each car.

 An employer can choose between the Statutory Formula Method and the Operating Cost Method for any given income year. This means that the employer can choose the method that will result in the lowest FBT liability/employee contribution each FBT year.

The logbook should record the following:

• When the logbook period starts and ends;
• The odometer readings at the start and end of the logbook period;
• The total number of kilometres the car travelled during the logbook period;
• The number of kilometres travelled for each journey recorded in the logbook. You will need to record the:
  • start and finishing times of the journey
  • odometer readings at the start and end of the journey
  • kilometres travelled
  • reason for the journey.
• The business-use percentage for the logbook period; and
• The odometer readings at the start and end of each income year you use the logbook method.

The logbook is to be kept for at least twelve (12) continuous weeks, is valid for up to five (5) years, and can be replaced at any time.

Note that where the logbook method is used for two or more cars, the logbook for each car must cover the same 12-week period.