Fringe Benefit Tax Changes: How It COULD Affect YOU.
Disclaimer: this is not intended to be taken as financial or taxation advice. Please see your accountant.
As if Australia’s flailing car industry didn’t have enough to worry about, the Labor Government’s proposed changes to Fringe Benefit Tax and the Carbon Tax have sent a chill wind through their offices as figures show that a potential extra cost of around $1400 per year per vehicle could stop the car lease industry in its tracks.
PM Rudd announced on July 16 that a reversion to a emissions trading scheme would replace the carbon tax, with part of this change involving a $1.8 billion AU cut in FBT concessions. Under current measuring methods, FBT is calculated at 20 percent of a vehicles cost, regardless of whether used for private or business use or private use via salary sacrifice, with the assumption that the car is being used for predominantly business use anyway. The change will require a comprehensive log book keeping of the vehicle’s use. The Government Minister for Transport, Joe Albanese says: “There’s a lot of people clearly fiddling the system. Those people who are salary sacrificing who use their car less than 20 per cent but claim the 20 per cent offset – less than one kilometre in every five they actually use for work – the chances are it’s not a Holden Commodore, it’s a BMW.”
Federal Climate Change Minister Mark Butler said recent technology made it possible to get a far more accurate idea of work-related car use and the Government had considered the FBT changes very carefully.
“It’s not the same as it was in the 1980s. You can download these very easy apps that use GPS systems to do the work all for you,” he said.
“You effectively just press the button, let it go and after you’ve finished marking that travel or recording that travel over the 12-week period every five years it can be automatically sent to your employer or your tax agent.”
The Federal Chamber of Automotive Industries has responded with CEO Tony Weber claiming: “The changes undermine the long-term certainty the FCAI and its members have called for from government and threatened to affect around one-third of new car sales in Australia.
“The effects will flow right through the industry, including to dealerships and service centres,” Weber said.
He said he doubted whether the government truly understood the consequences of its decision, and questioned why the industry was not consulted on such a significant change. I fear what this means for domestic manufacturing and I am urgently seeking meetings with the government to encourage them to reconsider this decision,” he said.
The Shadow Minister for Transport, Joe Hockey, had this to say at a meeting with automotive groups in western Sydney: “”This is going to be like a baseball bat to the motor vehicle industry in Australia. This is poorly thought out, there was no consultation with any stakeholders.”
Mr Hockey said 75 per cent of recipients earn less than $100,000 a year.
“They are going to be hit with a tax bill of $1400 a year, every year going forward,” he said.
Both Holden and Toyota have backed the calls from the FCAI to rethink its strategy, with other automotive industry analysts suggesting the changes further indicate an “out of touch with the real world” government, with the suggestion that technology will make the log keeping easier. It ignores the fact that the costs involved to companies to process manual log book keeping will result in higher prices of vehicles, more real time paperwork and the potential to damage the 80% fleet market sales Australian car makers have. It’s already caused one major fleet vehicle purchaser to freeze their order, pending further developments.
As stated, please consult your accountant for information, as it stands.
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Peter rosenberg says:
The proposed tax should be applauded.
The FBT should only be available to those who actually use their car for business purposes.
It is about time that this inequity was redressed.
July 26th, 2013 at 11:14 am
Peter rosenberg says:
The Federal Government should be applauded for the proposed FBT Tax.
The deduction should only be available to those who have a genuine requirement to use a vehicle for business purposes.
The reform was long overdue.
July 26th, 2013 at 11:16 am
Greg Carroll says:
I sincerely hope every member of parliament who has a taxpayer funded car (or cars) will have to contribute towards their fringe benefit
July 26th, 2013 at 11:47 am
Geoff says:
Being a beneficiary of salary sacrificing, cars, notebooks, superannuation. I have become increassingly uneasy about utilising this benefit on motor vehicles, so decided on this occasion to direct the cash to super instead. Encouraging car use at taxpayer expence would now weigh on my conscience. Encouraging financial independence in retirement saves the taxpayer in the long run. If I can afford to lease a car I can afford to pay cash after saving for it. I don’t expect the taxpayer to subsidise my commodity and consumption choices. The leasing industry simply needs to focus their business to more productive areas of the economy. The car industry, et al needs to survive by meeting the market not by Government support and taxpayer subsidies.
July 26th, 2013 at 12:26 pm
Bob Millington says:
This is so Typical of today,s goverment. This is just another revenue raiser hitting us all in the pocket. This has a massive impact on the rising cost of living and will only mean less food on the table. My Kids go without now and they will have to keep going without as the goverment keeps RAPING the Australian Worker. THIS IS DISCUSTING
July 26th, 2013 at 12:40 pm
John Aquilina says:
What is the Car Industry complaining about? Kevin Rudd & his band of merry Ministers have overseen the demise & destruction of MANY small & large business enterprise in Australia.
Don’t forget their overnight dismantling of the Home Insulation Scheme, when many small business owners who bought in stock from overseas were left with warehouses full of batts that would have been sold if the scheme continued as prommised.
Remember the BER – where contracts were let out to large building project managers on Public School jobs who charged 4 or 5 times the cost of the actual job. Private school Principals where able (trusted) with funds from the BER and got buildings & improvements up at around 25-50% the cost of Public School improvements. Then there where MANY small sub-contractors who were NEVER paid by the project managers the Fed Govt engaged.
The Live Cattle Export Trade – one show on the ABC sees the silly heavy-handed action of Gilliard & Co put an immediate end to trade. Tar all the good Australian sponsored & well managed Indonesian abbotoirs with the same brush. That Market void was simply filled by other cattle producers around the world, whilst our Cow Cockies had to put their herds down because of the lack of feed.
NBN Contractors aren’t getting paid
The ASADA drugs in Sport investigation. A grand display of diversionary politics. If public focus is becoming too much for the Politicians why not destroy the reputations of ALL our Athletes on the basis of a possible few bad apples. They have still yet to charge anyone, and are happy to let the problem fester to take up news time.
So the Car industry is an easy target – all you BMW driving, overpaid Fat Cats! How dare you seek to gain advantage over those who only can afford a weekly ticket to and from work! we have one of the LOWEST subsidised Car Industries in the WORLD – and companies like Ford, Nissan simply could not continue local production whilst fully imported vehicles where dumped in some cases on the Australian Market. Do we need Skoda, Infiniti, Opel, Proton, Seat, Dodge in an already crowed Marketplace? Per Capita there are more brands in Australia than any other market.
But Typical of this F!*K@d Labor Government they end up hurting the very people they say they represent. To think I used to vote for them
July 26th, 2013 at 2:27 pm
Michael Tolerton says:
Free ride on car fringe benefits rort about to hit a wall
Date
July 24, 2013
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Michael Pascoe
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Business or pleasure? Days are numbered for private vehicles getting business tax concessions. Photo: Glen McCurtayne
No one likes to lose a lurk and those making a nice living out of that lurk understandably hate to lose it even more. But the fact remains that the car fringe benefit tax and novated lease business has been just that: a lurk whose days were always numbered.
And that’s the inherent warning for Google and its peers at the peak of the tax avoidance industry, down to the odds and sods still enjoying smaller, iniquitous tax breaks – they’re not going to last because governments can’t afford such irrational largesse much longer.
It’s a farcical situation when vehicles driven for private purposes are given the same sorts of tax deduction and GST privileges as vehicles used for business, yet most of the coverage of the FBT reform seems to have been devoted to the squealing of those feeding off a policy that randomly advantaged a few and disadvantaged most Australians.
Ignoring the downside of a Mickey Mouse policy has created the impression that countless jobs are to be wantonly destroyed. And that is all the incentive the opposition has required to abandon any sort of principles in favour of a populist stance. In the same manner as its opposition to all forms of resources rent tax, this latest cheap stunt will no doubt generate plenty of donations for its election war chest.
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What’s being missed is that everyone who doesn’t have a novated lease to buy a new car is effectively subsidising the minority who do. According to the scheme’s promoters, it’s a subsidy worth about $3000 a year, and thanks very much to all the mugs in Australia who have been paying it.
The lurk industry would have you believe there are a whole pile of people who will otherwise catch public transport unless they are allowed to avoid paying GST on petrol, car maintenance and the purchase price. (They do have to pay GST on the sale of the vehicle, but that’s inevitably a lot less than the avoided GST on the purchase price.)
Avoiding GST is a key part of the appeal of a novated lease. As a slight simplification, the novated lease system allowed an employee to have all the GST involved in buying and running a car offset by the employer’s total GST collection obligation – meaning the ATO missed out on revenue.
A random application of GST exemption would stimulate buying activity in any sphere – but it would be very silly policy indeed. The Liberal Party promising to retain the car lurk is hypocritical when it’s also promising a white paper review of the tax system that will include consideration of broadening and/or increasing GST.
Three things are required for real tax reform: genuine political leadership, a responsible opposition and, particularly when the first two are missing, a crisis. We’re very short on the first two – the last big tax reform, the introduction of the GST, was only possible because we had a responsible opposition in the form of the Meg Lees Democrats who compromised to allow it through for the benefit of the nation, even though it cost them politically.
It was the crisis of needing to fund the carbon tax change that has produced this promised end to the novated lease rort, but it’s been percolating for a couple of years.
As to the bigger question of the car industry’s special pleading, Crikey’s Bernard Keane (one of the few journalists to see through the PR barrage) put it thus: ”According to the chorus of outrage from business peak bodies, the automotive sector and salary-packaging advice firms, requiring taxpayers to justify their exemption claims and thereby recouping $1.8 billion in taxes currently lost through exemptions will inflict critical damage on them. It’s one thing to say you need handouts to stay in business, quite another to insist a tax rort is the only thing keeping you alive.”
Maybe you wouldn’t want to plan a long career in that industry either.
Michael Pascoe is a BusinessDay contributing editor.
Read more: http://www.theage.com.au/business/free-ride-on-car-fringe-benefits-rort-about-to-hit-a-wall-20130723-2qhfi.html#ixzz2a7wSlUpS
July 26th, 2013 at 3:35 pm
Mike Nowell says:
I dont think Mr Dudd has thought this one through. Many of the so called lurks where given to govermnet staff in loo of a pay rise they could not afford to stop many off the staff leaving for private sector and other employment as they are drasticaly underpaid for the job they do.
So does this mean they will get a pay rise to offset this tax, i hope they do as they deserve to be paid a decent wage. So this money will have to come from our taxes…… So why bother doing this Mr Dudd, its once again a politcal scam to try and hold on to labour power…
I personely do not work for government sector, but am sure you can see my point.
July 28th, 2013 at 11:42 am
Paul H says:
Cracking down on tax avoidance cant be a bad thing. I am suprised the opposition alternative Treasurer support tax avoidance schemes.
If you qualify for the tax relief fill in the log book like the rest of us.
July 29th, 2013 at 10:56 am
jose says:
To all of those who applaud the FBT change , they forget that the car industry is not only the car manufacturers it implies the people who make spare parts , service cars , car componebts etc as soon as less cars are build or sold many people loose their jobs and then if you are in retail, services etc less people have money to buy and eventually will catch up with you and some how you will loose your job, it happen in America and Europe . buy the way I don’t have a leased car . Eventually companies will close, every change that cost jobs affects everybody.
July 29th, 2013 at 11:25 am