Driving less than 15,000 kms a year.

In the past, driving less than 15,000 kms a year was a real issue but now...

Now that the Australian tax rates have risen, so that the top tax bracket is over $180,000, paying your Fringe Benefit Tax out of your pretax does not make sense. The ATO statistics show that less than 2% of the Australian workforce is paying tax in the top bracket (46.5%).

How does paying your FBT post tax work?
Instead of your FBT being added onto you pretax deductions, (calculated below);

Car Value           Annual kms           GST Claim
Gross up
          FBT Tax
Rate
          FBT
Payable

20,000



$40,000 x 20% x 0.02647 x 46.5% = $9,846

Notice the FBT rate is 46.5%, so, no matter how many kilometres a year you drive, pre tax FBT means that you are always paying the top marginal tax rate.

Post tax FBT uses only, Car value x Annual kms, while not using the 'GST gross-up' nor, the 'FBT tax rate'.

Car Value           Annual kms                        
            Post Tax
Payable

20,000

                    
        
$40,000 x 20%



= $8,000

End of day difference, same employee, same car and same annual kilometres, the post tax could put thousands more into the employees pocket.

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