ATO ID 2004/385: Car fringe benefits: cost basis (operating cost) method - log book records not maintained
Date of decision: 31 March 2004
Year of income: Year ended 31 March 2005
Business line: Superannuation and Employer Obligations

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
Summary: 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.

Legislative references: Fringe Benefits Tax Assessment Act 1986 subsection 10(1) subsection 10(2) subsection 10(5) section 10A
Subject references: Fringe benefits tax Car fringe benefits FBT log book records FBT operating cost FBT car