Issue
Can an employer use the operating cost method to value the car fringe benefits in relation to a particular car, under subsection 10(2) of Fringe Benefits Tax Assessment Act 1986 (FBTAA), where a log book has not been maintained?
Decision
Yes. An employer can use the operating cost method of valuing all of the car fringe benefits for a particular car, under subsection 10(2) of the FBTAA, where a log book has not been maintained. However, there will be no reduction in the operating cost of the car for any business journeys that were made.
Facts
The employer provides a car to an employee which is used for predominantly private purposes.
The employer has never maintained a log book in respect of this car.
The employer elects to use the operating cost method to calculate the taxable value of the car fringe benefits in relation to this car.
The employee made a recipient's payment in relation to this car.
Reasons for Decision
Under subsection 10(1) of the FBTAA an employer may elect to use the cost basis (or operating cost) method to calculate the taxable value of all of the car fringe benefits that relate to a particular car.
The operating cost method under subsection 10(2) of the FBTAA makes provision for a reduction in the taxable value of the car fringe benefits in relation to a car where there has been business use of the car. However, under section 10A of the FBTAA, the employer is not entitled to make such a reduction unless a log book has been maintained.
Where a log book has not been maintained the taxable value of a car under the operating cost method will be the total operating costs of the car reduced by any recipient's payment. The employer is entitled to use the operating cost method of calculating the taxable value of the car fringe benefits but will be prohibited from making any reduction in the taxable value for any business use of the car. Note: Regard should be had to subsection 10(5) of the FBTAA. If the employer elects to use the operating cost method and this results in a higher taxable value than under the statutory formula method, the election will be deemed not to have been made. As such, the taxable value would then be calculated under the statutory formula method.
Amendment History
Date of Amendment Part Comment 11 March 2026 Business Line Updated to correct business line
Date of Amendment | Part | Comment
11 March 2026 | Business Line | Updated to correct business line