How to Calculate Tax Fringe Benefits When You Have a Large Fleet of Cars
Do you run a significant sales operation where a large number of agents are constantly on the road? If so, you may supply cars for them to use as they call on prospects and existing customers and you need to account for the associated costs very carefully for tax purposes. Over the last few years, you may have been challenged when trying to calculate fringe benefits for those employees, especially as each individual driver seems to develop their own pattern of usage. The good news is that help is at hand in the form of a new program introduced by the ATO. How can you streamline your accounting process here to help you focus on other and more important things?
Easier Solution
Up until recently, an owner in your situation would need to look at each individual vehicle within their fleet and determine the fringe benefit that way. Now, so long as you have a fleet of more than twenty cars, you can use a streamlined approach to calculate an average, which can, in turn, be used for several years ahead.
Averaging Logbooks
In order to do so, you must have a logbook policy in place for all drivers and require each of them to fill this in religiously to detail their work and leisure mileage. These cars must be what is known as "tools of the trade" and be essential for their actual work, rather than being a perk as part of a salary arrangement. They must also be standard cars and not classified as "luxury" in the tax code.
Simple Calculations
If you qualify and can confirm that at least three-quarters of the logbooks in question are accurate and up-to-date, then you will be able to calculate the average of business use across your organisation from the data contained within. You will then be able to apply this percentage to all your calculations for several years in advance, and this will include any new or replacement cars that come into the fleet over this time.
Time to Change
Of course, there are some applicable rules here, and if any substantial change takes place (such as relocation of your home depot), then you will need to alter your calculations accordingly.
Does This Work for You?
Always make sure that you are in full compliance whenever it comes to tax matters. If you're not sure whether you can implement this fringe benefit rule in your business, talk with tax agents first.
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