When considering minor exemptions you need to be aware that there are different rules for car benefits.
The notional taxable value of a car benefit is determined by applying residual fringe benefit rules.
To determine whether a car benefit is less than the $300 notional taxable value, you can either:
- apportion the operating costs of the car for a particular year by working out the percentage of private use and the difference between 100 and the percentage of business use, or
- apply the cents per kilometre method by multiplying the total business kilometres you travelled by the rate.
For example, an employer allowed an employee occasional use of one of its cars for special purposes. These included taking rubbish to a rubbish tip following a storm and travelling from home to work during a 3-day transport strike.
The employee did not otherwise have a general entitlement to use the car for private purposes.
The employer calculates that the notional taxable value of each of the benefits provided in the fringe benefits tax (FBT) year are all less than $300, using the cents per kilometre valuation method for the car. The value of each benefit to the employee is below the minor benefits threshold.
To determine whether this is an exempt minor fringe benefit, it’s necessary to consider the 5 criteria.
Considering criterion 1, the car benefits for this example are provided infrequently and irregularly.
Reviewing criterion 2, the sum of the value of all car benefits provided is not substantial.
Looking at criterion 3, there are no other associated benefits provided with the car benefits.
Criterion 4 deals with the difficulty of determining a value for the benefit. The value is not difficult to determine in this case but this doesn’t mean it may not be an exempt minor fringe benefit.
Considering criterion 5, the employer has provided these benefits to help the employee deal with unexpected events. The special purposes the car is used for are unexpected events, outside the control of the employer and employee. This makes the benefit less likely to be wholly or principally a reward for services.
Having considered the 5 criteria, the employer could decide it’s unreasonable to treat these minor benefits as fringe benefits, so the benefits provided to the employee are exempt minor benefits.
