Well if you’ve lived on another planet recently or can’t get yourself past the sports pages and the Essendon peptide saga, you may not be aware that the Federal Government has announced a significant change to the taxation treatment of employer provided and salary sacrificed motor vehicles. The changes will take place for vehicle contracts entered into after 16 July 2013.
In summary, taxpayers have previously been able to treat a significant percentage of a vehicle’s costs as business use, regardless of the number of business related kilometres travelled. This concession is allowed even if the employee uses the vehicle 100% completely for private use. By using the concessional “statutory formula” for determining the dollar value of the private use of a vehicle, this has the ability to reduce this annual figure to a maximum of 20% of a vehicle’s cost. This amount either has to be reimbursed by the taxpayer to the employer entity, or Fringe Benefits Tax is paid against this figure. The “statutory formula” can no longer be used!
The automotive industry, the car component industry, the salary packaging industry and those individuals who utilise this concession are all obviously up in arms about this “policy-on-the-run” proposal. About the only people jumping for joy are the Federal Government, as they have estimated these measures will recover $1.8 billion annually into an already leaking budget.
The Government argues that those people who are eligible to claim business related concessions for motor vehicle use can still do so, however they must now use a log book, to substantiate the business use percentage of the vehicle. Any remaining private use of the vehicle is either subject to FBT, or needs to be reimbursed by the taxpayer to the employer.
The opponents to the announcement argue that 300,000 workers across many industries will suffer, as they have built businesses based on the assumption that these long-held taxation concessions will continue to be available in the future. At the time of writing the automotive industry is looking at using a media blitz (in the same way the mining industry reacted to the introduction of a Mining Tax) to push back against the Government plan.
The opposition has already announced they will fight the changes announced by Labor. In other words the federal election may also be seen as a sort of referendum on changes to the FBT rules!
If you have acquired or are thinking of acquiring a vehicle through an entity you control (such as a Company or Trust) you need to be fully aware of how the proposed changes will affect you. If you currently have a motor vehicle included as part of your remuneration package you should not be affected. However when it comes time to changing over the vehicle, you will be impacted by the new rules. If you are an employer and have relied on offering these concessions as part of your ability to attract key team members, you will also need to be aware of how the changes may impact the value of the package you are offering to your team.
If there is any confusion – speak to the team at Green Taylor Partners.