Fringe Benefits Tax Log

What Is a Fringe Benefits Tax Log?

A Fringe Benefits Tax (FBT) Log is a record-keeping tool used by employers to track non-cash benefits provided to employees. In Australia, the Australian Taxation Office (ATO) requires these records to calculate the taxable value of benefits under the Fringe Benefits Tax Assessment Act 1986. While the term "log" is often used broadly, it specifically refers to two main types of records: the car logbook and the travel diary.

For many business owners, especially those in trades, this document is essential for separating business use from private use. If you provide an employee with a company car or pay for their travel, you must keep a log. Without it, the ATO may apply the statutory formula method, which often results in a higher tax liability.

In its simplest form, an FBT Log serves as evidence. It proves to the ATO that the benefits you have provided are for business purposes or helps you calculate the exact portion that is private. This log acts as the foundation for your annual FBT return.

When to Use This Document

You need to use this document whenever you provide a benefit to an employee that is not cash or salary. The most common scenario is a vehicle. If you run a business and your employees drive vehicles that are owned or leased by the business, you must decide how to calculate the FBT. To use the operating cost (logbook) method, you must keep a valid logbook for a continuous 12-week period.

You also need a specific type of log called a Travel Diary. This is required when an employee travels away from their home for work for six or more nights in a row. The diary must record the activities they undertook during that trip.

Even if you do not have cars or travel requirements, you might use a general FBT register. This is useful for tracking expense payments, property benefits (like giving goods to staff), or entertainment. If you run a small business and the total taxable value of your fringe benefits is low, you might qualify for the Record Keeping Exemption Concession. However, you still need basic records to prove you sit below the threshold.

Key Sections and Required Elements

The ATO does not provide a standard template form, but they have strict requirements about what information must be included. If these elements are missing, the ATO can disallow your records.

For a Car Fringe Benefits Logbook, the following elements are mandatory:

• Period of use: The logbook must cover a continuous period of at least 12 weeks.
• Odometer readings: You must record the odometer reading at the start and end of the 12-week period.
• Journey details: For each individual business trip, you need to record the date, the start and end time, the distance travelled in kilometres, and the reason for the journey.
• Odometer readings for trips: While not always explicitly mandated for every single trip entry in every software format, best practice dictates recording the odometer reading at the start and end of each journey to substantiate the distance.

For a Travel Diary, the required elements include:

• Location details: The date and place where the activity occurred.
• Time: The time the activity commenced and the time it finished.
• Duration: How long the activity lasted.
• Nature of activity: A brief description of the activity, clearly distinguishing between business and private time.

For a General FBT Register, you should track:

• Description of benefit: What exactly was provided (e.g., gym membership, mobile phone).
• Recipient details: The name and employment details of the person who received it.
• Date: When the benefit was provided.
• Cost: The taxable value or the cost of the benefit.
• Private use proportion: Any evidence that the benefit was used partly for business purposes.

How to Write a Fringe Benefits Tax Log (Step by Step)

Creating a compliant log requires discipline. It is not something you can usually recreate from memory at the end of the year. Here is a practical guide to setting one up.

Step 1: Choose Your Method

If you are tracking a car, decide between the statutory formula method and the logbook method. The logbook method often results in lower tax if the vehicle is used mostly for business. However, it requires the rigorous 12-week log. Once you choose the logbook method, you must maintain a valid logbook for that specific car.

Step 2: Set the 12-Week Period

Select a 12-week period that is representative of your usual travel. Do not pick a time when the car is sitting in the garage or when you are on leave. The period needs to be continuous. Mark the start date and the end date clearly.

Step 3: Record Vehicle Details

At the very start of the document, record the car's make, model, registration number, and engine number. Take a photo of the odometer on the first day and note the reading in your log.

Step 4: Record Every Trip

This is the hardest part. For every trip you make, record it immediately.

• Business trip: Driving from the office to a client site.
• Private trip: Driving from home to the office (generally private).

In your log, create columns for Date, Odometer Start, Odometer End, Kilometres Travelled, and Reason for Journey. Be specific in the reason column. Writing "Work" is often not enough. Write "Client meeting at 123 Smith Street" or "Delivery of materials to building site."

Step 5: Calculate Business Use Percentage

At the end of the 12 weeks, add up the total kilometres travelled and the total business kilometres travelled. Divide the business kilometres by the total kilometres to get your business use percentage.

For example, if you travelled 5000 kilometres total and 4000 were for business, your business use percentage is 80%. This percentage is valid for five years, provided your usage pattern does not change drastically.

Step 6: Maintain Odometer Records

You must continue to record the total odometer readings of the car at the end of each FBT year (31 March). You do not need to keep a detailed logbook every year after the first one, but you must update the odometer reading annually.

Step 7: Obtain Employee Declarations

If employees use the vehicles, you must get them to sign a declaration. This declaration confirms the number of days the car was available for their private use and any odometer readings they provided. This is a legal requirement under the Fringe Benefits Tax Assessment Act 1986.

Common Mistakes to Avoid

Many Australian business owners fall into traps that render their logs useless. Avoiding these mistakes can save you significant money and stress.

Estimating distances The ATO requires accuracy. Guessing that a trip was "about 10km" is not acceptable if the actual distance was 20km. Use your car's trip meter or GPS mapping to get the exact number. Rounding to the nearest kilometre is fine, but broad estimates are not.

Missing the 12-week deadline If you forget to log for a few days in the middle of the period, you cannot just fill it in later. The logbook must be maintained for the full continuous 12 weeks. If you miss a week, you generally have to start the 12-week process all over again.

Inadequate descriptions Vague reasons for travel are a red flag. "Business use" or "Inspection" does not tell the ATO enough. You should state who you saw and where. For example, "Site inspection at Westfield construction site for ABC Constructions."

Failing to lock in the percentage A logbook is valid for five years. However, if you buy a new car, you must start a new logbook. If you change your job and your travel patterns change significantly, you should also start a new logbook. Using a logbook from a previous life stage where you drove 90% business miles, when you now only drive 10%, will lead to trouble if audited.

Forgetting private use It is a mistake to only record business trips. The calculation relies on the total distance. If you only record business trips, the ATO will assume the rest is private, which is fine. But if you do not record your total annual odometer reading at the end of the year, you cannot calculate the percentage correctly.

Legal Considerations (AU)

Record Keeping Obligations

The law is strict on how long you must keep these records. Under Section 136 of the Fringe Benefits Tax Assessment Act 1986, you must keep your FBT records for five years. This five years starts from the date you lodge your FBT return, or when it is due to be lodged, whichever is later.

If you keep your records electronically, you must be able to produce them in a readable format if the ATO asks. Using software like Xero or MYOB is common, but you must ensure the backups are secure and accessible.

Privacy Obligations

Because these logs contain employee names, addresses, and travel habits, they are considered personal information. While small businesses with a turnover of less than $3 million are usually exempt from the Privacy Act 1988, it is still good practice to handle this data securely. If you are a larger business, you must comply with the Australian Privacy Principles regarding data security.

Payroll Tax Implications

FBT and Payroll Tax are linked. State Revenue Offices, such as Revenue NSW or the State Revenue Office Victoria, allow you to deduct the FBT you have paid from your payroll tax liability. This means your FBT Log is not just for federal tax; it is evidence for your state tax filings as well. If you cannot prove the FBT you paid, you may end up paying more Payroll Tax.

Interaction with GST

When you provide a fringe benefit, you may be entitled to claim GST credits. However, this depends on the type of benefit and whether you are using the logbook method or the statutory formula method for cars. Keeping an accurate log ensures you can claim the correct input tax credits without overclaiming.

The "Otherwise Deductible" Rule

If an employee would have been able to claim an income tax deduction for the expense if they had paid for it themselves, the taxable value of the fringe benefit can be reduced. To claim this reduction, you need evidence. The FBT Log serves as this evidence for travel and vehicle expenses.

Frequently Asked Questions (preview)

Can I keep a digital logbook on my phone? Yes. The ATO accepts digital records. Many apps use GPS to track trips automatically. However, you must still add the "Reason for Journey" manually. A GPS trace shows you went to a location, but it does not prove it was for business.

What happens if I lose my logbook? If you lose your logbook, you may need to rely on the statutory formula method, which is often less favourable. In some cases, the ATO may accept third-party evidence, such as diary notes or client appointment books, but you should attempt to reconstruct the log as accurately as possible if an audit occurs.

Do I need a logbook for utes and commercial vehicles? Special rules apply to vehicles that are not designed principally for carrying passengers. If the vehicle is a ute or a panel van with a carrying capacity of over one tonne, and it is used for work purposes, it may be exempt from FBT. However, you must keep a logbook if the vehicle is used for private travel, such as taking it home at night, to prove that the private use is "minor, infrequent, and irregular."

Is a travel diary different from a car logbook? Yes. A car logbook runs for 12 weeks and establishes a percentage use for five years. A travel diary is only required for specific overseas or extended domestic trips (six nights or more) and only covers the duration of that specific trip. You might keep both in the same year.

What is the Record Keeping Exemption Concession? If the total taxable value of the fringe benefits you provide during an FBT year is less than the capping threshold (which was $8,642 for the FBT year ending 31 March 2024), you may be exempt from the complex record-keeping requirements. However, you must still be able to show how you calculated that the value was below the threshold.