ATO Interpretative Decision
ATO ID 2003/586
Fringe Benefits Tax
Car fringe benefits: cost price of a car - associate of provider is a foreign company that manufactured the car
This version is no longer current. Please follow this link to view the current version. |
-
This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
When using the statutory formula method and determining the 'cost price' of a car, for the purposes of the definition in sub subparagraph 136(1)(a)(i)(A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the associate of the provider is a foreign car company that manufactured the car, will the wholesale price of the car include transport costs, customs duty and import duty?
Decision
No. When determining the 'cost price' of the car, transport costs, customs duty and import duty are not costs incurred by the foreign car company and do not form part of the wholesale price of the car.
Facts
The foreign car company manufactures the car outside of Australia.
On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car.
The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia.
The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company.
The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes.
The Australian company uses the statutory formula method for returning its car fringe benefits.
These facts are common in the 'Related ATO Interpretative Decisions' below.
Reasons for Decision
Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car.
'Cost price' is defined in subsection 136(1) of the FBTAA. Where a car is owned by the person and manufactured by the person, sub subparagraph 136(1)(a)(i)(A) applies. This is as follows:
the amount for which the car could reasonably have been expected to have been sold by the person by wholesale under an arm's length transaction at or about the time when the car was applied to the person's own use
Where the manufacturer sells the car it will be applied to the manufacturer's own use (refer to ATO ID 2003/585). Thus the cost price of the car will be the amount the manufacturer could reasonably expect to receive if they had sold the car by wholesale under an arm's length transaction, at or about the time the car was applied to the manufacturer's own use.
The term 'wholesale' or 'wholesale price' is not defined in the FBTAA. However the term 'notional wholesale selling price' is defined in note 2 to Table 1 to the Sales Tax Assessment Act 1992 as follows:
'notional wholesale selling price' means the price (excluding sales tax) for which the taxpayer could reasonably have been expected to sell the goods by wholesale under an arm's length transaction.
Thus, in determining the 'cost price' of a car for the purposes of the FBTAA, it will be instructive to examine how Sales Tax Public Rulings interpret and apply the term 'notional wholesale selling price' (NWSP).
Sales Tax Ruling SST 6, addresses the calculation of the NWSP in detail. Broadly, NWSP is a price a manufacturer would reasonably have been expected to sell the goods by wholesale, at a price reflecting the sum of:
- •
- the manufacturing cost of the goods;
- •
- the research and development costs associated with the particular goods;
- •
- the selling expenses, if the goods were sold by wholesale; and
- •
- a fair wholesale profit.
As the costs of transport, customs duty and import duty are not incurred by the foreign car company, they do not form part of the wholesale price of the car.
Date of decision: 3 April 2003Year of income: Year ended 31 March 2004
Legislative References:
Fringe Benefits Tax Assessment Act 1986
subsection 136(1)
sub subparagraph 136(1)(a)(i)(A)
Note 2 to Table 1
Related Public Rulings (including Determinations)
Sales Tax Ruling SST 6
ATO ID 2003/584
ATO ID 2003/585
ATO ID 2003/587
Keywords
Fringe benefits tax
Car fringe benefits
FBT base value
FBT cost price
FBT car
FBT statutory formula
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 3 April 2003 | Original statement |
| 28 August 2015 | Updated statement | |
| 29 November 2024 | Updated statement |
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
