In October 2016 the ATO released Practical Compliance Guidelines PCG 2016/10 - Fleet Cars: simplified approach for calculating car fringe benefits which allows for an optional, simplified approach to working out the business use percentage component of the operating cost method for employers with a fleet of 20 or more ‘Tool of Trade’ cars.
PCG 2016/10 outlines a simplified approach for calculating car fringe benefits that is expected to reduce the record-keeping burden on employers with large fleets by allowing them to rely on a representative average business use percentage to calculate car fringe benefits for the fleet under the operating cost method.
PCG 2016/10 applies to you if:
- you are an employer with a fleet of 20 or more cars
- the cars are 'tool of trade’ cars
- your employees are mandated to maintain log books in a log book year
- you hold valid log books for at least 75% of the cars in the log book year
- the cars are of a make and model chosen by the employer, rather than the employee
- each car in the fleet had a GST-inclusive value less than the luxury car limit applicable at the time the car was acquired, and
- the cars are not provided as part of an employee's remuneration package (for example, under a salary packaging arrangement), and employees cannot elect to receive additional remuneration in lieu of the use of the cars.
How to use the new guidelines within easyFBT
The Car (Vehicles) workpaper now includes a new column called Fleet Car for Simplified Business Use Approach? which can be used to select cars that you want to include as Fleet Cars within the meaning specified within PCG 2016/10.
When you select a car as a fleet car then if you have a valid log book percentage you should enter that into the Business Use Percentage from Valid Log Book column. Note: Where you don't have a valid log book percentage for a specified Fleet Car, then you must leave the Business Use Percentage from Valid Log Book field blank for that car ie don't enter a zero unless that is the valid percentage for that car.
In order to use the simplified business use approach correctly, easyFBT will ensure that you have selected at least 20 cars to be in your fleet and that at least 75% of these cars have a valid log book. Note: Where these requirements are not met then easyFBT will show a validation error if you have selected to use this method.
Choosing to use the Simplified Approach and entering your chosen Average Business Use percentage – within a standard (base) entity
The Car (Vehicles) workpaper does not use the Simplified Business Use Approach by default. To make the choice to use the Simplified Business Use Approach you have to first select Yes in the Use Simplified Business Use Approach? field available within the Fleet Cars tab located within the Workflow Manager > Setup > Properties and Settings feature. Secondly, easyFBT calculates the Actual Average Business Use Percentage based on the information entered for your Fleet Cars in the Car (Vehicles) workpaper but it does not automatically use that number due to the potential requirement to use a different chosen consolidated average value where you are consolidating for lodgement purposes (refer below for further details when consolidating).
If you are going to lodge the current base entity then manually re-type the calculated Actual Average Business Use Percentage value into the Chosen Average Business Use Percentage field.
After manually entering the calculated value into the Chosen Average Business Use Percentage field select the Ok button. easyFBT will then automatically recalculate the Car (Vehicles) workpaper using the Chosen Average Business Use Percentage for all of your selected Fleet Cars including ones where no valid log book was entered.
Choosing to use the Simplified Approach and entering your chosen Average Business Use percentage – where you intend to lodge a consolidated FBT return form
Where you are consolidating several base entities containing Fleet Cars for FBT Return form lodgement at the consolidated level then you will need to ensure that the correct Consolidated Actual Average Business Use Percentage is used for each base entity that contains Fleet Cars as this can’t be manually entered in a consolidated entity.
In each Base Entity containing Fleet Cars select Yes in the Use Simplified Business Use Approach? field available within the Fleet Cars tab located within the Workflow Manager > Setup > Properties and Settings feature.
Until you perform a consolidation you probably won’t know whether it is valid to use the Simplified Business Use Approach and you also won’t know the value to enter for the Chosen Average Business Use Percentage field.
Performing an initial consolidation will confirm that you can use the Simplified Business Use Approach and if so you will need to use the Consolidated Actual Average Business Use Percentage as the value to enter into each base entity’s Chosen Average Business Use Percentage field. Once this is done a final consolidation can be created which should then not show any validation errors for this method in the consolidation.
If you have any questions, need any help or want to provide your feedback on this new functionality within easyFBT 2017 then please contact us via either the Help link on our website or email us at firstname.lastname@example.org.