Tradies, salesmen, rural employees lose under FBT changes

11-May-2011

People who have purchased cars under salary sacrificing arrangements and who travel long distances as a matter of course to get to and from work will be penalised by the Government’s changes to the Fringe Benefits Tax (FBT) rate applied to cars.
 

Under the new conditions, announced in last night’s budget, people who have no choice but to travel over 25,000km per year who have been paying an FBT rate of 7 – 11% will now pay a flat rate of 20%.

Questions still remain as to how the changes will apply and if people currently engaged in standard 5 year leases will have to pay the new rate as of the next April to April FBT calculation period. If so, someone with a $40,000 car will immediately be paying $3,600 more in tax in a year if they drive 25,000 to 40,000 km or an increase of $5,200 more tax if they drive 40,000km or more in a year.

The automotive sector says this creates more uncertainty amongst potential buyers of new cars. At the very least it will distort car sales and possibly reduce them.

“Sudden changes in the rate and management of FBT will cause uncertainty in salary sacrifice arrangements, slow down vehicle sales, and cause concern for the vehicle industry.  The Government should focus on easing the administrative burden of FBT, set the flat rate at 15% and in light of the increased collections remove the inequitable luxury car tax,” said Victorian Automobile Chamber of Commerce Executive Director David Purchase.

“This is an attack on rural and regional drivers who travel long distances to work; it is an attack on tradespeople who have to drive long distances in doing their work; and it is an attack on the automotive industry,” said Sophie Mirabella, Shadow Minister for Innovation, Industry and Science.