Company cars – driving business
As the Australian economy changes and world oil prices rise, the whole concept of the company car is shifting. Not that long ago the traditional fleet vehicle was a large six or eight- cylinder family car like the Holden Commodore or Ford Falcon - in sleek white. But with improvements in small vehicle safety, combined with superior economy and handling, and the rising popularity of novated leases, company cars are changing too.
And as Toyota overtakes Holden as the most popular new car dealer in Australia, other players are coming onto the scene, stealing the thunder from the two big players.
How does a company car arrangement work?
Many employers are now offering their employees the option of including a company car in their salary package. How does this work?
A car from the company's fleet is included in an employee's salary package as a fringe benefit. An arrangement is established between the employer and employee detailing all conditions of the contract, including (but not restricted to):
- determining how running costs of the vehicle are to be paid;
- agreeing upon what the vehicle can be used for (business only, limited private use or total private use);
- maintenance issues; and
- any additional drivers allowed.
Fringe Benefits Tax on company cars
A fringe benefit is something provided by an employer, an associate of the employer or a third party under an arrangement with the employer, to an employee as a result of their job.
Employers pay Fringe Benefits Tax (FBT) on the value of the benefit. A company car generally attracts FBT when it is owned or leased by the employer and used privately by an employee.
If a company car is usually garaged at or close to an employee's home it is considered to be available for private use, even if the company car agreement states they do not have permission. Travel to and from work is also considered private use.
If the value of all your fringe benefits is greater than $1000 in a year, your employer will record the value of these benefits on your group certificate. This is your reportable fringe benefits amount and reflects the gross salary you would have to earn to purchase the benefit from after-tax dollars.
Although you don't pay income tax on this FBT amount, it is used for other calculations, such as income tests used for government benefits.
Reducing your FBT amount
There are a number of ways in which the FBT amount on your payment summary can be reduced:
- arrange with your employer to swap your fringe benefits for an increase in salary; or
- by making voluntary employee contributions that reduce the taxable value of a fringe benefit. These can only be made out of your after-tax salary and can't be used towards more than one fringe benefit.
Company car fleet monitoring systems
- A number of company car providers are now providing monitoring technology to keep track of employee movements.
Holden recently released new technology in their VE Commodore that could change the way employees use their company cars. GM Fleet View is a powerful car-monitoring system, designed to record an employee's every action while in the car.
It can monitor:
- tyre wear;
- vehicle operating times;
- vehicle positioning;
- vehicle speed; and
- even how economically the car is being driven.
While some people have concerns about potential privacy issues, monitoring technologies like GM Fleet View will give employers the ability to know their employee s’ every move; long lunch breaks, weekend drives along the coast and evening trips to the shops could all be a thing of the past as the technology gives its data in real-time. And you might think twice before speeding up the highway at 150km / h in your company car if the boss knows your top speed.