MONTHLY TAX TIP — COVID-19 and FBT savings for home-garaged cars

Where a car held (e.g., owned or leased) by an employer and provided to an employee is garaged at the employee’s home, a car fringe benefit will arise and FBT may be payable.

However, there may be periods during the 2021 FBT year where an employer-provided
car has been garaged at an employee’s home due to ‘lock down’ restrictions imposed in response to the COVID-19 crisis and has not been driven during the period it has been garaged at home, or has only been driven briefly for the purposes of maintaining the car.

In the absence of any concessions, a car fringe benefit would generally arise as a result.

Thankfully, the ATO has introduced a concession that will allow employers in this situation to reduce their FBT exposure. To be eligible for the concession, an employer must elect to
use the operating cost method, in writing, before lodging its FBT return for the year and
maintain odometer records to show that during the period the car is garaged, it has not been driven, or has only been driven briefly for the purposes of maintaining the car.

If these requirements are met, the ATO will accept that the employer does not ‘hold’ the car for the purposes of providing fringe benefits to the employee (i.e., for the period in which
the car was garaged, and remained unused or was briefly used for maintenance purposes
at the employee’s home).

This means that any FBT for the car is calculated with respect to a reduced ‘holding period’, which can potentially reduce the employer’s FBT liability.

Tax Tip March 2021