Tax Benefits of FBT For Companies and Trusts

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.