Is 2025 The Year to Electrify Your Fleet?
Gradual changes to Fringe Benefit Tax over the past four years have had serious cost implications for large enterprises and small businesses alike. For a company with hundreds of vehicles subject to this tax, the cost of these changes runs into millions of dollars.
Many vehicles provided as part of an employment package are subject to FBT. This can be determined through keeping a logbook or using a calculation known as statutory fraction. Keeping a manual logbook is onerous ? a large company typically has a full-time employee to manage logs for every 100 vehicles in its fleet.
Many relied on statutory fraction because it was easier. There were four bands but three-quarters of vehicles fell into one of the top two ? those driving between 25,000 and 40,000 kilometres a year paid 11 per cent; those travelling more than 40,000kms paid 7 per cent. The Henry Report introduced a flat rate of 20 per cent, which was phased in gradually over three years starting in 2011. The tax rate effectively doubled or tripled depending which of these two bands your vehicle fell into. Before the changes, a $35,000 car that did more than 25,000kms in a year would be subject to $11,000 in FBT over three years. The same car today would be liable for $20,000. For a large enterprise with hundreds of vehicles subject to FBT, staying on statutory fraction could waste millions of dollars a year.
The good news is that logbooks don't need to be a nightmare. Using the Navman Wireless electronic logbook, which has been approved by the Australian Taxation Office, it's easy to collect the data you need to make an accurate claim. Here's how it works:
As soon as a driver starts a vehicle, they have to identify themselves using a pin number. They're then asked to select the purpose of the trip from a range of categories like 'going to the office' or 'visiting a client'. The logbook entry is now complete and gets fed into an FBT report at the end of your journey. This is in a digital format so nobody has to type out manual entries and the finance department can quickly make an assessment on whether to claim statutory fraction or operational cost. Getting this information has been one of the biggest challenges for accountants.
Knowing that the data is accurate also removes one of their biggest fears. The ATO has technology systems that correlate vehicle logbooks against road tolls and car parks. If you mistakenly record that a vehicle wasn't used last Saturday but it went over the Sydney Harbour Bridge, the ATO will know about it. At this point you've voided your logbook and the default position is 100 per cent private use. For a $35,000 vehicle that does more than 25,000kms a year you're going to pay almost $40,000 in taxes over a three-year lease period. That's more than the value of the vehicle.
Apart from people and buildings, a fleet of vehicles is typically the third biggest cost in business. It's also the biggest risk because so many workplace fatalities and injuries happen in or around a vehicle. It's your biggest addressable cost and yet for most companies it's not measured or managed. If you need a full-time employee to manage logbooks for every 100 vehicles there's a significant opportunity to increase efficiency. Switching to electronic logbooks means that person is instantly freed up to do more valuable work.