Car fringe benefits

If you make a car you own or lease available for the private use of your employee, you may provide a car fringe benefit.

For fringe benefits tax (FBT) purposes, a car is any of the following:

  • a sedan or station wagon
  • any other goods-carrying vehicle with a carrying capacity of less than one tonne, for example, a panel van or utility (including four-wheel drive vehicles)
  • any other passenger-carrying vehicle designed to carry fewer than nine passengers

Working out the taxable value of a car fringe benefit

To calculate a car fringe benefit, an employer must work out the taxable value of the benefit using either:

  • the statutory formula method (based on the car's cost price)
  • the operating cost method (based on the costs of operating the car).

You can choose whichever method yields the lowest taxable value, regardless of which method you used in a previous year. However, if you have not kept the required documentation for the operating cost method (for example, log books), you must use the statutory formula method.

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