Changes to Fringe benefit tax (FBT) on Vehicles financed by salary sacrifice

[Richoson Avid PP Poster! Find all posts View Profile Close Richoson]

The easy answer is to negotiate with your employer for a "fully maintained private use included company car" now that the rules have changed. Good luck with getting bullbars, lift kits, tyres etc.

Bad news for the old tax dodge!! Richo.

[alternative Senior Member Find all posts View Profile Close alternative]

It is great scam I had planned on keeping my 150 after the term was up anyway, looks like they have carved that in stone now.

[Richoson Avid PP Poster! Find all posts View Profile Close Richoson]

It is great scam I had planned on keeping my 150 after the term was up anyway, looks like they have carved that in stone now.

Hi

I bought my 90 series Prado on a car allowance and then paid it out after the 4 years kept it until 2009 with a 240,000's ks on the clock no troubles then I ha dno issues buying the 150 privately, very happy.

Regards, Richo.

[tempestv8 Member Find all posts View Profile Close tempestv8]

There will always be winners and losers. For the folks that live in the inner city who do not drive a lot, this means they don't have to find ways of racking up 25,000 kms a year if they only drive 16,000 kms a year, just as an example. I fall into that category, and I used to lend my car out to folks to do long trips - I remember a year, I had to lend out my car to 4 different people, who happen to want to drive from Melbourne to Canberra or from Melbourne to Sydney and back, just so I got to my 25,000 km bracket. Absolutely crazy.

This also stops wasting fuel just to make up the kms to get into the right FBT bracket. And we may now start to see used cars with LOWER kms on the odometer in the coming years as a result of this change. And for owners, this could be good too because there's less depreciation due to racking up unnecessary mileage on their salary packaged vehicles.

On the other hand, for some folks who genuinely have long distances to travel due to the distances from home to work or other reasons, this is definitely a drawback.

[two+four Advanced Member Find all posts View Profile Close two+four]

I guesse those who can't afford to salary sacrifice don't pay tax. The rest of us fund the country.

Some of us can most likely afford to do it but work for a company that doesn't allow it

Neil

[Corigator Avid PP Poster! Find all posts View Profile Close Corigator]

Neil, I have to agree. If it were me I would have been pestering my employer to allow me to sacrifice and get the benefit. Its probably too late now.

Here is the official statement from the tax office our employer has just recieved. (I hope the table works)



Distance travelled during the FBT year (1 April – 31 March)

Statutory rate (multiplied by the cost of the car to determine a person's car fringe benefit)

0 – 15,000 km
0.26 Existing Contracts

0.20 from 10 May 2011 (New Contracts)

0.20 From 1 April 2012 (New Contracts)

0.20 From 1 April 2013 (New Contracts)

0.20 From 1 April 2014 (New Contracts)

15,000 – 25,000 km

0.20 Existing Contracts

0.20 from 10 May 2011 (New Contracts)

0.20 From 1 April 2012 (New Contracts)

0.20 From 1 April 2013 (New Contracts)

0.20 From 1 April 2014 (New Contracts)

25,000 – 40,000 km

0.11 Existing Contracts

0.14 from 10 May 2011 (New Contracts)

0.17 From 1 April 2012 (New Contracts)

0.20 From 1 April 2013 (New Contracts)

0.20 From 1 April 2014 (New Contracts)

More than 40,000 km

0.07 Existing Contracts

0.10 from 10 May 2011 (New Contracts)

0.13 From 1 April 2012 (New Contracts)

0.17 From 1 April 2013 (New Contracts)

0.20 From 1 April 2014 (New Contracts)

Cheers, Greg

[Corigator Avid PP Poster! Find all posts View Profile Close Corigator]

Well the table didn't quite work, but it looked good in the preview.

The essence is that the changes are phased in over 4 yrs and don't apply to exisitng contracts

[Richoson Avid PP Poster! Find all posts View Profile Close Richoson]

Folks

I think some are missing the point of the proposal, it is designed to stop a "tax dodge", people that aren't able to get salary sacrificed cars get a company car that is supplied for genuine company usage won't be disavantaged. If you use taxation loopholes then you will need to have a Creative Accountant to gain your best advantage.

What about the people that have to get to work in areas that public transport can't make it work and have to use their personal car, they aren't able to access salary sacrifice unless their employers deem a car is necessary for the execution of their duties. If you use salary sacrifice as a taxation benefit and don't use your car for significant work percentages then this may benefit you at a disadvantage to genuine users of vehicles.

Let's see how our accountants can minimise taxation, unless of course you are an average PAYE employee.

[A10 Member Find all posts View Profile Close A10]

Salary sacrificed vehicles do not necessarily have to be used for work purposes. Mine is a private vehicle salary sacrificed through a novated lease. As I see it, the only people that will be disadvantaged will be those that do more than 25000km. If you do between 15000 and 25000, there is no change and if you do less than 15000, you benefit.

[two+four Advanced Member Find all posts View Profile Close two+four]

I suspect after a few years of this new sceme it will not bring in anywhere near the amount of money the goverment expects as they learn that a lot of people only chose the higher km options to save money.

[05oiler Junior Member Find all posts View Profile Close 05oiler]

I think people are missing the point. Salary sacrifice is a legitimate arrangement between the employer and the employee to lease back a vehicle from the employer and pay for it with pre-tax salary. This is an approved Federal Government arrangement and is not a "tax dodge". The FBT is payable because it is an employee benefit provided by the employer. It was instituted to assist employers to provide benefits to retain employees and to support and assist the automotive industry. For those employers who arrange salary sacrifice there are benefits, most large companies do. The intersting thing about the changes instituted in the budget are that they haven't stopped the salary sacrificing of motor vehicles (otherwise referred to as the rort). All they have done is change who pays the most FBT. The people who only travel up to 15,000 km will benefit from this change. Oddly this is most likely those who live in inner city urban areas. Did you note that in the election results most of the electorates that polled well for the Greens were innner city urban electorates. When I was doing my research leading up to taking up salary sacrificing, it was 25,000 km plus where it made it worthwhile over taking out private financing. I note today reported in the newspaper that 3 out of 5 salary sacrifices are for more than 25,000 km. This means that by altering the FBT rates, it is about getting more revenue than any philsophical concept about travelling more kilometres. The reality is that many people using salary sacrifice travel a lot of kilometres but don't have the alternative public transport options. Many city people have subsidised public transport whilst country and outer urban people are forced to travel long distances with no other options. In my industry, managers used to be supplied vehicles to travel for work purposes. Then in a cost cutting measure they transferred the cost of running those vehicle to the employees through salary sacrifice arrangements. Instead now they recompense the business miles whilst we pay for all other operational costs. Some people run vehicles with 100,00km per year leases. Whilst they can claim the business miles they have to accept the depreciation and running costs. The point of all this is that we are dealing with a cynical government that doesn't have the mandate to govern in its own right and is answerable to the Greens. Remember these are the people who want to stop us from accessing parts of our own country and modifying our vehicles. Don't be conned by the rhetoric. These people have agendas that will not be to our benefit.

Garry

[REV Find all posts View Profile Close REV]

05oiler,

You are spot on with all of the above, when I 1st went into Novated leasing I was already doing 25K per year so opting for 25001km per year @ 11% instead of 20% was a no brainer.

Since then we have purchased a car for the Minister for Everything and with the latest lease I could have dropped the Km's travelled per year, but for a saving of 9% it was very easy to keep it at 25001 km per year.

two+four

This Government does indeed have it's own agendas, but so does any alternative Government.

It would be nice to meet an Honest & Trustworthy Politician, wouldn't it?????????????????????

Cheers
Lawrie

[two+four Advanced Member Find all posts View Profile Close two+four]

couldn't agree more Lawrie, your comments to Oiler support my view and I agree about your goverments comment. As for trustworthy politicians, I do know one and have known him for years even before he was a politician. The pity is he does not live in Australia

[Bazza Senior Member Find all posts View Profile Close Bazza]

Gary, you are spot on.
It's the old story, only believe half of what the government tells you.
This new rule will effect me greatly. I've been in my job for over 20 years, when I started, I negotiated a company fleet car to be included in my salary. When the company gave up running their own fleet they offered me a salary sacrificed notated lease vehicle from a fleet management company. I travel in excess of 45,000k each year for private and business use and have had 3 leased vehicles, including the current one, all attracting a 7% FBT. No one makes money on high mileag ex-leased vehicles when it's time to sell them. When the FBT goes up to 20% it will be no longer worth leasing them.
In NSW, the previous government decided that they could make more money by making it law that all salary sacrificed notated lease vehicles now had the to registered as "company" vehicles which meant, as a resident living in the south, I could no longer claim back my toll expenses on the M5. That alone has cost me be about $4,000 a year. So it's not all that attractive as some people think... you need to do your homework before getting into leases and hope that the government doesn't want to screw you a bit more!
Bazza

[bgreeni Member Find all posts View Profile Close bgreeni]

I have a salary sacrifice vehicle. Coy policy is that I am not allowed to use it for work for trip longer than 200km and cannot claim any mileage if I use it for less (they say tax advise is that they own car and so cannot pay me for use). Basically all trips are to be by taxi or pool vehicle for round town. Longer trips are to be hire vehicles (usually charged to client or project). I thus struggle to exceed 25K per year, and this year lent the vehicle to step daughter who drove to eastern states for holiday to ensure the kms were achieved. When current lease finishes in 18 months time I will have to look hard at what I do. Unlikely I would work long enough to see out another lease anyway.