The Contribution Method gives employees a way to reduce their FBT liability by contributing to the running cost of the vehicle. For every after tax dollar that an employee contributes it reduces the FBT liability by one dollar. 

 

The employee can either:

• Make payments to the running costs of the vehicle e.g. fuel

• Make payments directly to the employer for the lease payments

• Pay part of the lease payment from their after tax salary
   

Employees need to find out whether their employer allows for the employee contribution method. This needs to be confirmed prior to establishing a lease quotation. 

 

Example: 

Tony travelled 26000 kilometres in the FBT year. His vehicle cost $42560 before on road costs. 

 

FBT                   = $42560.00 x 20% x 365 / 365 - $0                           

    = $8512.00 x 2.064662 x 0.465

FBT Liability     = $8172.10 

 

If Tony contributes $ from his post tax income the FBT liability is zero. 

 

FBT                    = $42560 x 20% x 365 / 365 - $8512.00                           

     = $0 x 2.064662 x 0.465

FBT Liability     = $0