Statutory Formula Method

The Statutory Formula Method is given by the following equation:

A    =    the base value of the car

B    =    the statutory percentage

C    =    the number of days in the FBT year when the car was used or available
             for the employee’s private use

D    =    the number of days in the FBT year

E    =    the employee contributions (your post tax deductions)

By understanding each element of this equation you will understand how to manage your FBT.

A = Base value

The base value of your car relates to the car's purchase price.

The base value is the GST inclusive purchase price, less non-taxable on road costs.

You can access information about your car's FBT as part of your online account.

Reduction in Base Value

The same base value must be used for your car until your employer has held the car for four full FBT years.

A full FBT year is any year where the car is held from 1st April to 31st March.

After this time your employer is entitled to a once-only reduction to two thirds of the car's initial base value.

B = Statutory Percentage

The statutory percentage applied depends on the number of kilometres travelled during the FBT year, a 12-month period from 1 April to 31 March.

At the beginning of your novated lease we ask you to estimate how many kilometres you travel in a year.

The number of kilometres you actually travel during the FBT year determines the statutory percentage.

If your actual kilometres are less than your budgeted kilometres there will be a shortfall and you will have to pay more for your car's FBT.

C = Number of Days Benefit was provided

If your novated lease is not in place for a full FBT year, we need to work out how many kilometres you would have travelled if the car was leased for a full year.

To do this the following formula is used: 

M    =    the number of kilometres travelled in the period the car was leased

N    =    the number of days in the FBT year (eg. 365 or 366 in a leap year)

O    =    the number of days your employer held the car for during the FBT year

Days Unavailable

Your car will only be considered to be unavailable for private use if it is kept in safe storage away from your place of residence.

During this time, neither you nor an associate may have custody or control over the car, nor can you use the car for private purposes.

If you are claiming for days unavailable you will need to provide this information to your employer.

Days Unavailable Forms

D = Number of Days in FBT year

There are 365 days in an ordinary FBT year and 366 days in a leap year.

E = Employee contribution

An employee contribution is any car operating cost paid directly by you in after-tax dollars, for which you are not reimbursed.

An employee contribution reduces the taxable value of the car fringe benefit by the amount of the contribution.

For employees on Employee Contribution Method this is your after-tax contribution.

Gross-Up

Once the taxable value of the car fringe benefit is established, it is grossed-up to reflect the gross salary that would have to be earned to purchase the benefit from after-tax dollars.

The gross-up rate assumes salary is being earned at the highest marginal tax rate and includes the Medicare levy.

There are two gross-up rates. The gross-up rate used depends on whether your employer is able to claim input tax credits for any GST paid on expenses incurred on the car.

Type 1 (2.0647 gross-up)
Employers able to claim input tax credits for any GST paid on expenses incurred on the car.

Type 2 (1.8692 gross-up)
Employers unable to claim input tax credits for any GST paid on expenses incurred on the car.

Once the grossed-up taxable value is determined, it is multiplied by the FBT rate, currently at 46.5%.