Choosing lower cost vehicles , reducing availability for private use and a obtaining a contribution equal to the value of the benefit could minimise FBT to nil. If the employee is a shareholder employee the contribution can be a simple automated book entry.
Employees who have a company car “available” for private use are deemed to be receiving a non cash benefit called a fringe benefit and the value of the benefit is currently 20% of the cost price of the vehicle including gst pa. So if the company buys a car for $30,000 incl gst the taxable benefit would be $6,000. There is an option to calculate the value of the benefit on the diminished book value each year but the percentage multiplier to use is set higher at 36% and you have to stick to the method you start with, you can’t start with cost and flip to book value later.
The general Fringe benefit rate is 49.25% but can be as high as 63.93% if the benefit is provided to high income earners. The business does get to claim the Fringe Benefit Tax paid as a business expense which does reduce the effective fringe benefit tax cost.
Spending less on the company or business vehicle would reduce the value of the benefit and FBT liability. The minimum value amount you can use is $8,333 even if the car cost $5,000.
Availability is another factor so if the car is not available for private use on some days there is no benefit on that day. So for example an Employee A as part of their work needs to take the company work related vehicle home as they need to travel to different sites from home or they may be on call, they are instructed in writing private use is only available in the weekends ( 2 out of 7 days ), the employer monitors the use and the vehicle cost the business $30,000 incl gst. The value of this benefit pa is $30,000 x 20% x 2/7 = $1,714 (down from $6,000).
The value of the benefit is also reduced by any employee contribution in consideration of the private use. So if the employee reimburses the business the $1,714 there is no Fringe Benefit and no Fringe Benefit tax to pay. The business can still claim 100% of the vehicle expenses and depreciation.
