Q: The department lends short-term hire cars to senior executives when their own cars are being repaired. Most of these costs are covered by insurance. Andrew's car was damaged in an accident, so he got a hire car from the department. The department paid $660 for the hire, but they got $400 back from insurance. What kind of benefit is this, and how is it taxed? Does the insurance refund affect the tax? What if the insurance company provided the hire car directly? Any exemptions?
A: The hire car benefit is not considered a regular car benefit unless it's hired for more than three months continuously. In Andrew's case, since it's short-term, it falls under residual fringe benefits. The taxable value is the cost minus any contribution from Andrew. Assuming Andrew paid nothing, it's the hiring cost minus insurance refunds. Only the part used for personal reasons is taxed. If the insurance company covers the cost directly, there's no fringe benefits tax (FBT) since the department didn't pay anything. Unfortunately, there are no exemptions for this type of benefit.
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