PM announces company car FBT changes to partly fund ETS bring forward

[reax]

So is anyone work in the field and what does it mean for those of us with associate leases, or are about to get another one.

 

 

On 16 July 2013, the Prime Minister and the Treasurer formally announced that the Government would bring forward the start date of emissions trading to 1 July 2014. From that date, a floating price on carbon will apply. Under the previous arrangements, the carbon price was to be $25.40 per tonne from 1 July 2015. Under a floating price, the figure is expected to be around $6 a tonne. Government assistance to emissions-intensive trade-exposed industries will continue unchanged.

The PM said this will cost the budget around $3.8bn over the next 4 years. The Government said it will make up for the lost revenue through savings, including $1.8bn from changes to FBT arrangements relating to employer-provided cars. The Government proposes to remove the statutory formula method for both salary-sacrificed and employer-provided car fringe benefits for new contracts entered into after announcement [ie after 16 July 2013], with effect from 1 April 2014. Existing contracts materially varied after 16 July 2013 will also fall under the new arrangements. Existing contracts that are not varied will continue to have access to the existing statutory rate throughout the contract. All car fringe benefits for new leases will be calculated using the operating cost method from 1 April 2014. People who use their vehicle for work-related travel will still be able to use a log book to ensure their car fringe benefit excludes any business use.

 

 

 

 

[wasserkuhl]

This is an interesting change and as such will effect both Employers who supply vehicles to employees and also employees who have what is commonly known as a 'Novated Lease' whereby the employer provides a car allowance(To service the Lease Repayments) within the employee's salary package.

 

What is the impact?

 

More FBT Impost/tax on both employers and employees on what is perceived to be the 'private' useage of such vehicles.

 

Specifically, the Private use portion of such vehicles will have an increased FBT cost(on what it is now) applied to Private Use Km's and then Taxed to the employee and/or the Employer. The Increase , I would suspect will be proportional to the Carbon Cost Per Tonne. (Smoke and Mirrors, in other words.)

 

How much and what is the impact?

 

Exact estimation is not possible as this is a new policy , so lack of design, testing and thought has been given to it, It is a portion of the Strategy to cancel the Carbon Tax, rename it and apply it into smaller pockets of taxation law. 

 

A good example to guage the impact is:

 

Call your local Auto electrician and ask him what a Re-Gas of an air-con system cost before the Carbon Tax. Then ask him what it now costs. Calculate the percentage rise between before and after and there you have the approximate increase in reportable FBT for you individually or as an employer.

 

How to avoid it?

 

Only use the car for Business use and document this in your logbook in great detail. Any personal Use will be penalised.

 

Another way to avoid it is to think very carefully before you Vote at the next federal election as this is exactly the type of thing that is ruining life for both small business' and their employees.

 

Not to encourage a vote for Labor, Liberal or other. It is everyones choice to back whichever party has the clearest and most concise plan for Australia's Future.

[reax]

Basically it is the end of the associated lease.

[Harvs11]

...as this is a new policy , so lack of design, testing and thought has been given to it..

Nailed it!

[GC9911]

40 company cars, 65 employees. just the sort of ill conceived policy that encourages me to employ more people. I'm sure my employees will appreciate having their taxable income grossed up even more, should cut a few more of them out of family benefits etc, they will be over the moon!

[Harvs11]

Don't forget the millions of dollars spent preparing businesses to work with the new policy only to have it torn up a year or two later.

[Guest Harold]

It is just another step in the Gillard/Rudd process of taxing the rich or at least the perceived rich, to fund the incompetence and excess of a lost and feeble government. It is ill thought out and will have a deleterious effect on the motor industry. It is in line with the removal of the private health care rebate, the increase to 30% input tax on super etc.

[D-banger]

More taxes???

 

M..U..S..T   R..E..S..I..S..T   P..O..L..I..T..I..C..S      

[Harvs11]

More taxes???

M..U..S..T R..E..S..I..S..T P..O..L..I..T..I..C..S

Yeah, yeah Doug. We know the rules Isn't this justified PFA fodder in that it has a direct impact on our ability to own, maintain, preserve and above all ENJOY our P cars?

[Simonk]

For those who don't know how it works, the statutory method calculates FBT on 20% of the cost of the car. The operating cost method requires a log book to be kept for 12 weeks to calculate the private usage. That percentage is then applied to the actual running costs plus depreciation and interest. FBT is then calculated on the private amount.

I've done numerous case studies comparing salary packaging a car vs buying it personally and the difference is often negligable. Forcing everyone onto the operating cost method makes salary packaging a car less viable for those with high private use. So those who currently salary package under the statutory method will likely buy their next car personally and the benefit to the government will be half of F all.

[GC9911]

Simon, agree with you. My P car is private as not benefit running it through the company. I am encouraging all my guys towards car allowance or just increasing salaries to take into account funding their own car. Sometimes you should be careful what you wish for, the Govt well may outsmart themselves once again.

[Vas]

From the rules  " This includes political, racist, sexist or religious opinions. This is a CAR FORUM folks!"

 

Not sure if anyone cares anymore, but they are the rules.
 

[PeterP]

As someone who has spent the last 12 months feeling the effect of the general lack of confidence in our economy and government, I find this "policy on the fly" just astounding. I came out of a fairly strong role, and since looking to re-enter the corporate world, am astounded at the wary approach to growth that exists generally in business. No-one knows what this government will do next, so business is reluctant to expose chance it's arm, so to speak.

I have to add that Rudds face in the background when Bowen corrected his statement was priceless..........for my money, bring on the election,please....

[GC9911]

Point taken Vas.

[withers]

You wouldn't be happy if you just signed a new lease!

[Vas]

Yes, this is how it starts out.

Now what if someone has a different point of view.

As a Porsche forum it will be by nature a bit "right wing".

Someone looking at this may reply with something that will be seen as inflammatory by that group and away we go.

Why even start a topic so obviously political when these rules have been set up to avoid this very fact.

 

I don't understand why no one else will say anything.

Lets have the rules or not, but if we have them lets stick with them.

[wasserkuhl]

OK. End of.

 

Perhaps Mods can lokc the thread so we can get back to Porsches.

[GC9911]

Full stop.

[Uncle]

I would of thought this issue would have a direct impact on some Porsche owners and be a fair topic to discuss.

 

I have no interest in left right or otherwise but I was going to lease a duel cab ute this year and sink a little more money into a second later P car. This clearly has an effect on me being able to do that. Or maybe I just need to book daily meetings between sites for the first 12 weeks. One site is very close to my house to it would almost be like just going to work and back...

 

I guess once a mod tells me to shut up I will.

[Simonk]

Uncle, check out the list of FBT exempt cars on the ATO website. Chances are your ute may be on there in which case you won't be affected. Let me know if you're having trouble finding the list.

[D-banger]

I think Vas (and possibly others who have not spoken up) are concerned that discussions on politics, religion etc have the real potential to become inflammatory.  It does happen elsewhere but PFA members seem pretty good so far.  This is a public board so I think people need to be more open to taking into account alternative views, but at the end of the day there is no need for ill will.

 

That said, I think this topic should be open for discussion, but not the politics.

 

So with regard to Uncles post, I think many P-Car owners may be in a beneficial position with regard to the operating cost method.  The operating cost method is all about business/private use.  Many of us own P-Cars as a second car.  You could use your P-Car for all private use, or nearly all private use, and thereby minimise private use of your daily.  The high business use would mean that most of the operating costs are claimable and the low private use would mean low FBT.

 

I would be interested in any opinions on this from accountants/specialists out there.

[Boxer]

+1  I don't think the thread needs locking - just keep the political persuasion and view point out.  The actual policy and implementation thereof will likely be applicable to the audience here - healthy discussion in my book

[Pitstop Paul]

How much is a re-gas anyway?

[Uncle]

Who has AC!

[Simonk]

I would be interested in any opinions on this from accountants/specialists out there.

 

Whether salary packaging a car is worth it or not is dependent on a number of factors;

 

Cost of the car

Income and the marginal tax rate of the employee

How many kms the car travels

How much private use there is

The cost of running the car

Whether the employer will pass on the FBT to the employee

Who pays for the running costs

 

If you have a luxury car salary packaged then you should be using the operating cost method as the statutory percentage is killer on high cost vehicles. If you barely use it for business purposes then it's hardly worth salary packaging but the factors above will determine that.

 

If you have an average run about salary packaged and you don't use it for business purposes, you'll probably find under this proposal that it's best to buy the next car personally. The operating cost method will likely work out worse for you than if you owned the car personally. As I mentioned previously, I've run a few scenarios for clients in this category and often the difference between salary packaging a car under the statutory method and owning the car personally isn't much different. There are situations where you can be worse off under salary packaging.

 

For those that are salary packaging under the operating cost method you need to prepare a log book for 12 weeks. After that, the log book percentage calculated lasts for 5 years. As Doug mentioned, during that 12 week period, drive your porsche for the private trips and use the company car for the business trips to drive your log book percentage up.

 

Here's a link to the FBT exempt vehicles.

 

http://www.ato.gov.au/General/Fringe-benefits-tax/In-detail/Exemptions-and-concessions/FBT---exempt-motor-vehicles/?default=&page=1

 

As always, contact your adviser to find out the best scenario for your situation