The Fringe Benefits Tax (FBT) changes in the 2011 Federal Budget were put in place to stop the unnecessary driving that was encouraged by the tax system around novated leasing. A year down the line, novated leasing specialist Autopia can report that the changes have worked.
Prior to 10th May, 2011, the tax breaks delivered by novating your car increased along with the distance travelled. The Bracks Report (2008) first provided evidence that if you reward people for driving more kilometers – then that’s exactly what they’ll do.
The Henry Report – 2nd May 2010 – proposed the following:
"The current formula for valuing car fringe benefits should be replaced with a single statutory rate of 2O per cent, regardless of the kilometres travelled.”
The review continued “At the margin (… of the different tax brackets…), this may encourage individuals to travel unnecessary kilometres.”
This resulted in the FBT changes along with a four year phase-in period for all statutory rates to eventually reach 20%.
Autopia made the decision to skip the phase-in, however, and moved to 20% straight away for all new novations, to reduce complicated annual recalculations and prevent escalating vehicle costs from catching drivers out.
"In addition to making the whole process simpler, what this has also done is to enable Autopia to predict the outcome of a tax change three years before it fully comes into play," says Greg Parkes, Director of Corporate Benefits.
The results are as follows:
<15,000km = 16%
15,000 – 24,999km = 31%
25,000 – 39,999 km = 43%
40,000 km+ = 10%
<15,000km = 35%
15,000 – 24,999km = 36%
25,000 – 39,999 km = 23%
40,000 km+ = 6%
2011 – 2012 change
<15,000km = 19% increase
15,000 – 24,999km = 5% increase
25,000 – 39,999 km = 20% decrease
40,000 km+ = 4% decrease
As you can see, there’s a significant redistribution away from the higher kilometre brackets, and taken together – the <25,000 bracket has seen a 24% increase.
For more information about this announcement, or to schedule an interview please call Greg Parkes on 0414 944 789 or email at [email protected]
Autopia is a vehicle salary packaging company that delivers quantifiable bottom line results to a business.
Our unique combination of vehicle, finance and tax expertise is unequalled in the industry, and it’s these skills that provide our clients with an increase in profitability that no other salary packaging company can match.
P: 0414 944 789
Barry ScottP: 0410 931 683