Changes that can trigger the new 20% FBT statutory formula rate
Note: An easy way of calculating the FBT on the provision of a car fringe benefit is by applying the statutory formula method.
Over the next few years, this will be simplified further by applying a flat 20% rate, but in some cases that rate may be ‘brought forward’…
Where cars are being leased by employers for their employees, they must be sure not to trigger “an alteration to a pre-existing commitment”.
For example, terminating a lease and entering into a new one would be such a trigger and the new 20% flat rate (or applicable transitional rate) would begin to apply from the start of the FBT year following the change.
Other examples of such alterations include:
- refinancing the car;
- alterations to existing lease contracts, such as changing the duration of an existing lease contract, and changes to a lease to reflect a revised residual value; and
- where accessories (such as window tinting, DVD players, luggage racks or bull bars) are fitted to a leased car after the lease started, and the lease payments are increased to reflect this change.
If such changes are made and the employer remains the same, the employer will only begin to apply the flat 20% rate (or applicable transitional rate) from the beginning of the next FBT year.