The Gillard Government will change the fringe benefit treatment of cars to remove
the unintended incentive for people to drive their vehicle further than they need
to, in order to obtain a larger tax concession.
Phasing out the current car fringe benefit treatment is a sensible reform from both
a taxation and an environmental perspective, and implements another recommendation
of the Australia's Future Tax System Review.
Under the 'statutory formula' method, a person's car fringe benefit is determined
by multiplying the relevant statutory rate by the cost of the car. Currently, the
sliding scale of rates provides an increased tax concession for salary-sacrificed
or employer-provided vehicles that are driven further.
The Government will replace the current rates with a single flat rate of 20 per
cent that applies regardless of the distance travelled.
This measure improves the underlying cash balance by $953.9 million over the forward
estimates.
This reform is a step in the right direction for Australian families, the environment
and the Budget bottom line.
This reform will only apply to new vehicle contracts entered into after 7:30pm (AEST)
on 10 May 2011, and will be phased in over four years as shown below:
|
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)
|
|
Existing contracts
|
New contracts entered into after 7:30pm (AEST) on 10 May 2011
|
|
From 10 May 2011
|
From 1 April 2012
|
From 1 April 2013
|
From 1 April 2014
|
|
0 – 15,000 km
|
0.26
|
0.20
|
0.20
|
0.20
|
0.20
|
|
15,000 – 25,000 km
|
0.20
|
0.20
|
0.20
|
0.20
|
0.20
|
|
25,000 – 40,000 km
|
0.11
|
0.14
|
0.17
|
0.20
|
0.20
|
|
More than 40,000 km
|
0.07
|
0.10
|
0.13
|
0.17
|
0.20
|
Compared to the current statutory rates, a single rate of 20 per cent will:
- Increase the tax concession provided for vehicles driven less than 15,000 kilometres
a year;
- Maintain the current tax concession provided for vehicles driven between 15,000
and 25,000 kilometres a year; and
- Decrease the tax concession provided for vehicles driven more than 25,000 kilometres
a year.
People who use their vehicle for a significant amount of work-related travel will
still be able to use the 'operating cost' (or 'log book') method to ensure their
car fringe benefit excludes any business use of the vehicle.
CANBERRA
10 May 2011