Log books need to be kept by employers using the operating cost method for FBT purposes so that they can estimate and validate the business use percentage of a car.
The more personal use the more tax paid.
Anyone who has been through this process knows it is time-consuming, particularly where there are multiple cars.
The ATO has now made the process simpler where employers have 20 or more ‘tools of trade’ cars. A tool of trade car is a car required for the job – like for a sales representative required to travel extensively for business purposes.
There are a few conditions to access the simplified method:
- Valid log books need to be kept for at least 75% of the cars in the log book year;
- The employer (not the employee) chose the make and model of the car;
- Each car in the fleet has a value less than the luxury car limit when purchased;
- The cars are not provided as part of an employee’s remuneration package (e.g. under a salary packaging arrangement); and
- Employees cannot elect to receive additional remuneration in lieu of the use of the cars.
If these conditions are met, the employer can apply an average business use percentage to all ‘tool of trade’ cars held in the fleet in the log book year and the following four years. Employers who can access this simplified method can apply this approach for five years assuming the key details remain the same.