ATO ID 2003/586: Car fringe benefits: cost price of a car - associate of provider is a foreign company that manufactured the car
Date of decision: 3 April 2003
Year of income: Year ended 31 March 2004
Business line: SEO

Issue
When using the statutory formula method and determining the 'cost price' of a car, for the purposes of the definition in subparagraph 136(1)(a)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the associate of the provider is a foreign car company that manufactured the car, will the wholesale price of the car include transport costs, customs duty and import duty?

Decision
No. When determining the 'cost price' of the car, transport costs, customs duty and import duty are not costs incurred by the foreign car company and do not form part of the wholesale price of the car.

Facts
The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits. These facts are common in the 'Related ATO IDs' below.

Reasons for decision
Summary: Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car. 'Cost price' is defined in subsection 136(1) of the FBTAA. Where a car is owned by the person and manufactured by the person, subparagraph 136(1)(a)(i) applies as follows: the amount for which the car could reasonably have been expected to have been sold by the person by wholesale under an arm's length transaction at or about the time when the car was applied to the person's own use [emphasis added] Where the manufacturer sells the car, it will be applied to the manufacturer's own use (refer to ATO ID 2003/585). Thus, the cost price of the car will be the amount the manufacturer could reasonably expect to receive if they had sold the car by wholesale under an arm's length transaction, at or about the time the car was applied to the manufacturer's own use. As the costs of transport, customs duty and import duty are not incurred by the foreign car company, they do not form part of the wholesale price of the car.

Legislative references: Fringe Benefits Tax Assessment Act 1986 subsection 9(2) subsection 136(1) subparagraph 136(1)(a)(i)
Related ATO interpretative decisions: ATO ID 2003/584 | ATO ID 2003/585 | ATO ID 2003/587
Subject references: Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT car FBT statutory formula