Car fringe benefits: 1/3 reduction in the base value of a car under the statutory formula method
14 November 2004
Subsection 9(1) of the FBTAA sets out the formula for calculating the taxable value for one or more car fringe benefits for a particular car held by the employer, where the employer uses the statutory formula method. Under subsection162(1) of the FBTAA a car is 'held' where it is owned, leased or otherwise made available to the employer by another person.
Subsection 9(2) of the FBTAA explains how to calculate the base value of a car. Under paragraph 9(2)(a) there is provision to reduce the base value component where a car is owned (subparagraph 9(2)(a)(i)) or leased (subparagraph 9(2)(a)(ii)). Whether the car is owned or leased is not relevant, it merely needs to be 'held'.
The 1/3 reduction in base value is allowed 'where the commencement of the tax year is later than the fourth anniversary of the earliest holding time'. Therefore, the reduction is determined on the length of time between the first time the car is held and the current time. If this difference is 4 years, then a 1/3 reduction in the base value may be made at the commencement of the next FBT year. The car does not need to be held continuously for the entire 4 year period for the reduction to be made.