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Car and vehicle fringe benefit changes - what they mean for you

Supplier: Zenith Finance By: Richard Korda
16 June, 2011

While Bob Brown is applauding the recent Fringe Benefit Tax changes in the 2011 budget announcement, the motor vehicle industry believes those in business are losing out.

Essentially, the federal budget has altered the concessions for those who drive cars as part of a salary package. The aim is to protect against loopholes in the system, by having a flat rate of tax to protect against people trying to reduce taxes by doing more kilometres.

So instead of a 7% rate of tax for vehicles travelling more than 40,000 kilometres a year, and 26% for vehicles travelling less than 15,000 kilometres, this system will be replaced by a single flat rate of 20%.

Who pays more?

The flat rate of tax benefits people who drive 15,000 to 20,000 km per year in the car. This lowest usage bracket receives the same rate of benefits as higher usages, so they gain the same, but pay less along the way.

However, most people drive an average 25,000 km in a year according to Treasury data.  Around three out of five motorists who the tax will apply to drive more than 25,000 km annually, so they’ll pay more


How to work out your yearly km

If you under-estimate kilometres to be travelled for the coming FBT year, you’ll have to repay any shortfall. So to work out your yearly kilometres, three months into the FBT year record the:


Kilometres travelled to date

Number of days of current FBT year the vehicle has been held average daily kilometres (total divided by number of days). Then multiply the average daily kilometres multiplied by the number of days in the FBT year.

What if you’re leasing?

Operating leases are more likely to prove advantageous in the new FBT environment, as the changes only apply to the statutory method of calculation.  The way companies and drivers use and report on their vehicle use will be impacted, but anyone signing novated leases since 10 May will be directly impacted.

Feel free to get in touch with our team for any help you need regarding vehicle leasing finance. For tax and financial advice, you’ll need to consult your financial advisor.

Source: Zenith Finance