6. Fringe Benefit Formula: Monthly Cost plus the Cost of fuel
The number of vehicles held by employers under “operating leases” (rented) has increased.
An “operating lease” is used for moveable property (such as a motor vehicle) and its identifying elements are explained in an earlier section of this workbook, so need not be repeated.
If the vehicle is rented via an “operating lease” and the right to use the vehicle for private travel is granted to an employee, the income value of the fringe benefit is calculated as the: “Actual cost incurred under the operating lease plus the cost of fuel incurred on the same vehicle”.
Note the following:
1. The fringe benefit calculation formula is based on the premise that the vehicle will be used for only private travel purposes, and that by arrangement, the rental company and the employer pay for all running costs
2. The cash value of the fringe benefit can be reduced by any consideration paid by the employee to the employer (excluding any consideration paid for the cost of licences, insurance, maintenance, or fuel).
3. In circumstances where the vehicle is not rented via an “operating lease, the ‘Fixed percentage’ formula must be used to calculate the value of the private use.