Fringe Benefits Tax (FBT) legislation was introduced in 1986 to capture tax revenue on certain employee “non cash” benefits.

For example, FBT will capture the private use by employees/directors/associates of a “company” non-commercial vehicle. However, tax savings can be obtained using the same regulations. A tax benefit is achieved by claiming 100% of the cost of the benefit and offset by private usage based on a single broad formula. The end result is a net tax saving.

FBT regulations apply to companies and trusts. For individuals and partnerships, tax deductions for non-commercial vehicles are restricted to two methods – Log Book or Rate Per Kilometer. Both of these methods can be restrictive. Accordingly, a company or trust business structure can access tax benefits using FBT regulations that are not available to a sole trader or partnership.

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