One of our staff members is provided with a car fringe benefit by way of novated lease.
The staff member met with an accident in which the car was extensively damaged.
The vehicle was sent to a panel repairer for approximately 4 weeks. During this time, the staff member used a hire car provided by their car insurer.
When we calculate the FBT liability for the FBT year, can we exclude the 4-week period even though the employee had access to a hire car provided by their insurer?
Yes, it is acceptable to exclude the 4 weeks when calculating the car fringe benefit taxable value.
The ATO publication, “Fringe benefits tax – a guide for employers” in chapter 7, states that where a car is in a workshop for extensive repairs, for example, following a motor vehicle accident, it is not available for the private use of the employee. However, a car is available for private use where it is in the workshop for routine service and maintenance.
The unavailability of the car is relevant for both the statutory formula and operating cost methods. The statutory formula method incorporates a pro rata component when calculating taxable value for the days the car was not used, or available for, private use.
Under the operating cost method, the car will not be taken to be ‘held’ by the employer for the 4-week period on the basis it is not being held to provide fringe benefits during this time. Therefore, operating costs relating to the car for this time frame (e.g. registration, insurance) are not included in the taxable value calculation.
The provision of the hire car is an arrangement between the insurer and the employee and is a result of the policy of insurance and not due to any facilitation or arrangement with the employer.