Cars Leased to Owned
Fringe benefit tax applies to cars leased for your employee's private use. However, the arrangement is a car fringe benefit only if the lease is bona fide. Certain conditions must be met for a lease to be considered bona fide and therefore eligible for vehicle FBT.
If you set up a lease that includes a provision for the employee or their associate to purchase the car after the end of the lease term, or be allowed to keep using the car after the end of the lease, the benefit is a property or residual fringe benefit, not a vehicle benefit.
If you provide a leased car to employees, then at the end of the lease buy the car for its residual value, the car becomes 'owned'. For FBT purposes, if the car is still provided as a benefit, it may require two rows to record this change in the Vehicle workpaper.
Note that you must use the same method for both periods, either only Statutory Fraction Method (SFM) or only Operating Cost Method (OCM) as an individual car can only be treated under one or other method, not a mixture of both.
Latest Information
See the ATO website for additional details and the most up to date information:
Example
In the following example, the car is using a log book percentage and the user will apportion costs and use OCM on both rows.The car was leased for 45 days of the FBT year then notionally 'disposed' and reacquired as 'owned' for the remaining 320 days. The costs are apportioned for the periods. The deemed interest and depreciation are calculated for the period owned and added to the costs. The date first held remains the same on both rows.
Days available | Annual lease payments* | Op Cost Registration | Op Cost Insurance | Op Cost Fuel & Oil | Op Cost Rep. & Maint. | Op Cost Other |
365 | 8000 | $700.00 | $800.00 | $2,000.00 | $600.00 | $50.00 |
Apportionment | ||||||
45 | 986.30 | 86.30 | 98.63 | 246.58 | 73.97 | 6.16 |
320 | 0.00 | 613.70 | 701.37 | 1753.42 | 526.03 | 43.84 |
Total | 986.30 | 700.00 | 800.00 | 2000.00 | 600.00 | 50.00 |
* So much of the charges that are paid or payable under the lease agreement that are attributable to the period when the car was held. | ||||||