FBT Bracketing changes in the 2011/2012 budget year:

[Lardman]

Crackdown on excess car use to avoid tax

Phillip Coorey

May 6, 2011

Salary-sacrificed cars ... the government is cracking down on tax concessions rorting.

THE federal budget will save almost $1 billion by cracking down on the rorting of fringe benefits tax concessions for those who drive salary-sacrificed cars.
It is understood the government has adopted a recommendation from the 2009 Henry tax review to end the system in which people can reduce their tax bill by clocking up extra kilometres.
Instead, a flat rate of tax will apply, regardless of the distance driven in a year.
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This will end the practice of people going for a long drive towards the end of the financial year to reduce their tax bill.
While those who drive short distances in a year will be better off, those who drive more than 25,000 kilometres a year will be penalised unless they log every kilometre travelled and separate business from personal use.
The measure is expected to save about $950 million over four years and will be one of the biggest saving measures in the federal budget on Tuesday.
The changes will apply to what is known as the statutory formula which applies to an employee's car fringe benefit.
Under the present system, if a person drives a salary sacrificed vehicle up to 15,000 kilometres a year, the taxable fringe benefit is calculated at 26 per cent of the purchase price of the vehicle.
This drops to 20 per cent for distances of 15,000 to 25,000 kilometres a year, and to 11 per cent for distances of 25,000 to 40,000 kilometres. Distances of more than 40,000 kilometres attract a tax rate of 7 per cent.
Under the change, a flat rate of 20 per cent will apply for all distances. This means those who drive up to 15,000 kilometres a year will be better off. The Henry review found large spikes in the numbers of people who drove just far enough at the end of each financial year to put themselves in a lower tax threshold.
The Greens have long demanded the rort be stopped because in effect it rewards people for burning fuel. The Greens are expected to be happy with the change.
The car industry is also expected to be happy with the change, first signalled in the 2008 Bracks review of the automotive industry, because there is an option for those who drive more than 25,000 kilometres a year largely because of work.
The government will not touch the alternative to the statutory formula which is the log book method. If drivers choose this option, all business use of the vehicle does not count towards the fringe benefit.
Meanwhile, budget measures to force teenage mothers into work or training or face losing their parenting payments are likely to face resistance from the Greens and the opposition.
Extra money would be provided for childcare and other support for young mothers while they either work, go back to school or learn skills.

Source: Crackdown on excess car use to avoid tax

[TD]

Good info, thanks. I was wondering when they were going to implement this.

I've done a few long drives in March to hit the targets when I was leasing!

[Logan]

I am in the 20% bracket anyway so it doesn't effect me to much.

Sent from my Nexus S using Tapatalk

[blackbetty]

its pretty shit though for ppl who were in the higher brackets before and eassily making their lease kms

[Logan]

Yeah, seems like the actions of a few have ruined it for people.

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[Reedy]

The fact that loophole was there at all means the system was fundamentally flawed from the start. This always puzzled the shit out of me when all the guys with leased cars at work would go on completely frivolous drives just to get their k's up. It's needlessly wasteful.

[TD]

Good simple explanation of the changes

2011 - 2012 Federal Budget and how it will affect Australian businesses and employees: Autopia

[A Pirate]

Yes it was a but of a sweetener, a little incentive to work harder and drive where ever you wanted in a new car..... if you were in this scheme you were already doing 15001+ km per year in your car (and it only goes up from there) if not you would not have embarked into this tax reduction method...end of the day the saving are not that great but still better than nothing (it use to be a fair bit better before 2005).
Im a little fed up..the harder I work the more the government TAXES, the more I tighten the belt the more the government takes...what incentives are there for me to earn more money? They have means tested the Medicare rebate & baby bonus, they have now taken the lease car intensives away...what incentives are left to work hard and be successful when the government taxes them away from the people who pay the MOST TAX? BUT The unions sure have it good as to the Illegals, set top box sellers, school hall builders and insulation installers to mention only a few! What a great government we have to run this country! But Labor is here for the working Australian right?

Little rant over

[Reedy]

Ha, I like the cut of your jib. A fitting complement for a pirate.

The answer to your rant is we have this Labor government because Australia voted them back in again. Apparently the Australian public think a high taxing and ineffective big government ideal is better than letting us spend our own money responsibly and in ways that we see fit. After all, the money we work hard to earn does belong to them. Apparently.

We have a crap government because we voted for a crap government, we only have ourselves to thank for that.

[Artemis]

It only changes for leases taken out after 10th May 2011, not existing ones thank god.