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You may have heard that the government has very recently announced some changes to the FBT treatment of car fringe benefits – here’s what it means for you:
Who does this affect?
The proposed changes affect employees who are provided with vehicles or employees who salary sacrifice vehicles and began this process after July 16th – so in the last 2 weeks. This does not affect employees and sole traders who claim deductions for work-related travel expenses when they use their own car for work reasons or those who are paid a travel allowance.
What has changed?
Previously, company owned vehicles driven by employees or salary sacrificed vehicles were able to use a statutory formula to calculate the fringe benefits tax. This tax was either paid within the arrangement or offset by a contribution by the employee. Statutory formula allowed the calculation of the fringe benefits tax to be done based on the number of kilometres travelled with no regard for the actual work related use the vehicle had.
The proposed changes remove the statutory formula meaning that the only method available to calculate the fringe benefits tax will be the operating cost method. This method is based on a log book and only allows for the actual work related use to be beneficial. Where the private use is high, operating cost generally shows a higher amount of fringe benefits tax payable as opposed to the statutory formula. For this reason, the removal of statutory formula is expected to have a significant impact.
Why has this happened?
Remember the emissions trading scheme? Well the Labor government (or are they just going with Rudd Government these days? I saw a poster on the M1 last week and the word Labor was no where to be seen) have decided to bring forward the commencement of the carbon emissions trading scheme and as part of this they announced some changes, one of these being the FBT treatment of car fringe benefits.
When will this happen?
This has not been legislated and some may question whether this will actually happen if the current government is not re-elected. Should the proposal become legislation, it will effect all new purchases made after July 16th, 2013. The change will be put in place from April 1st, 2014.
What should I do?
If you are currently provided with a business owned vehicle or are in a salary sacrificed arrangement that was entered into prior to July 16th, these changes do not apply to you. – there is no need to do anything, everything will continue on as usual.
If you have entered into a new agreement since July 16th, please contact the office and we will discuss the effect of the changes relevant to your specific situation.