Car fringe benefits tax change - is it in the wrong gear?
Monday, 22 July 2013
In the face of claims of significant job losses, the Federal Government is under considerable pressure from the car industry to dump or scale back a $1.8 billion increase (over 4-years) in car fringe benefits tax (FBT).
However, a senior academic at the Australian School of Business has stated that while job loss claims should be taken seriously and critically analysed, the Government's change to FBT is merely removing a tax concession.
Associate Professor Dale Boccabella from UNSW's Australian School of Business says the federal government's proposed removal of tax concessions for private use of employer-provided cars was inspired by the need to help pay for the reduced revenue from moving to a floating carbon price earlier than first planned. "It is also restoring this part of the tax system to a principled and equitable position; something that has been lost in the debate."
"The Government though has not been able to sell the message that this is the removal of a tax concession that is not available to all taxpayers. Any new cars salary-packaged or provided by employers will only be valued under the operating cost method and this relies on keeping track of the use of the car for business purposes."
He says this is a change from the easier tax treatment that has applied under the now axed statutory formula method, which has been used by many taxpayers. "This places extra tax compliance obligations on a lot of people but the government has said that this is not that onerous because of current technology. Contrary to some Government suggestions, this is a tax increase for taxpayers, because a lot of the FBT paid by employers is a cost passed on to employees, who retain the use of an employer-provided car."
He also says the short transition period is arguably unfair. "In 2011, when the old four components rates under the statutory formula method were removed and replaced with one rate resulting in higher tax, the Government gave affected taxpayers a three-year transition period to the higher rate. So why not follow a similar approach with the removal of the statutory formula to give taxpayers and the car industry more time to adjust?"
For further comment call Dale Boccabella on 9385 3365, or Email email@example.com
Media contacts: Julian Lorkin: 02 9385 1574