Issue
When using the statutory formula method and determining the 'cost price' of a car, for the purposes of the definition in subparagraph 136(1)(a)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the associate of the provider is a foreign car company that manufactured the car, will the wholesale price of the car include transport costs, customs duty and import duty?
Decision
No. When determining the 'cost price' of the car, transport costs, customs duty and import duty are not costs incurred by the foreign car company and do not form part of the wholesale price of the car.
Facts
The foreign car company manufactures the car outside of Australia.
On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car.
The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia.
The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company.
The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes.
The Australian company uses the statutory formula method for returning its car fringe benefits.
These facts are common in the 'Related ATO IDs' below.
Reasons for Decision
Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car.
'Cost price' is defined in subsection 136(1) of the FBTAA. Where a car is owned by the person and manufactured by the person, subparagraph 136(1)(a)(i) applies as follows: the amount for which the car could reasonably have been expected to have been sold by the person by wholesale under an arm's length transaction at or about the time when the car was applied to the person's own use [emphasis added]
Where the manufacturer sells the car, it will be applied to the manufacturer's own use (refer to ATO ID 2003/585). Thus, the cost price of the car will be the amount the manufacturer could reasonably expect to receive if they had sold the car by wholesale under an arm's length transaction, at or about the time the car was applied to the manufacturer's own use.
As the costs of transport, customs duty and import duty are not incurred by the foreign car company, they do not form part of the wholesale price of the car.
Amendment History
Date of Amendment Part Comment 29 November 2024 Thoughout Added subsection 9(2) in legislative references, as referenced in reason for decision. Updated Business line to SEO. 28 August 2015 Throughout Updated to: • Reflect legislative amendment to the definition of 'cost price' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986. • Remove references to repealed legislation in the Sales Tax Assessment Act 1992. • Remove references to withdrawn Sales Tax Public Ruling 6.
Date of Amendment | Part | Comment
29 November 2024 | Thoughout | Added subsection 9(2) in legislative references, as referenced in reason for decision. Updated Business line to SEO.
28 August 2015 | Throughout | Updated to: • Reflect legislative amendment to the definition of 'cost price' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986. • Remove references to repealed legislation in the Sales Tax Assessment Act 1992. • Remove references to withdrawn Sales Tax Public Ruling 6.