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What Kevin’s mad thrashing means to your novated lease

By johnboy - 18 July 2013 63

As Kevin Rudd makes wild drastic policy changes to fund his easing up on carbon pollution (like getting rid of 800 senior public servants) they’re also messing around with salary sacrificing to buy new cars (the only reason to buy a new car compared to the bargains in the second hand market).

With many Canberrans having availed themselves of the old arrangements (and many planning to) Easifleet have sent us their advice, which they’ve sent to their customers:

Important information regarding your Novated Lease

The Government has announced that it plans to terminate carbon tax and implement an emissions trading scheme. Part of the plan to fund this is to abolish the statutory formula for Fringe Benefits Tax on cars, this means that (if it is implemented) FBT would no longer be calculated based on 20% of the FBT value of the car, but instead on the Operating Method, i.e. based on actual business use.

This change, if implemented will not affect current lease holders unless there is a material change in your lease agreement, this may include changing employer.

Novated Leasing under this scheme will change significantly and require new lease holders to monitor their work related kilometres and tax savings will be calculated on verified work usage only. People will be required to keep a logbook for 12 weeks to monitor business usage and will only be able to claim that business usage pre tax. Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.

By way of a practical application to explain business usage and the impact to Novated Leasing. If a Nurse, Police Officer or Local, State or Federal Government employee drives to work, parks their car, spends a day working and drives home they will have 0% business use and 100% personal use and will not receive any benefit from salary packaging a car. The thousands of dollars per year that they are currently saving from Novated Leasing will no longer be available to them.

Easifleet is still providing our customers with Novated Lease quotes based on the 20% statutory fraction with the expectation that the Government will realise the significant impact that this proposed change will not only have on people interested in getting a new Novated Lease, but also the flow on effects to car dealerships, car manufacturers, salary packaging companies, finance companies and the thousands of people that they employ.

If you disagree with the proposed change I urge you to call Chris Bowen’s office on 02 6277 7340 and register your disapproval with this proposed change.

What’s Your opinion?


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63 Responses to
What Kevin’s mad thrashing means to your novated lease
chewy14 4:25 pm 18 Jul 13

mezza76 said :

johnboy said :

If the tax treatment has stood for decades however, and it has significantly reshaped the economy around it, one would like to see it changed after considered consultation and deliberation rather than during an all-nighter to make up the numbers for Kevin’s sound bite.

Yes! If only we had some sort of review… possibly headed by a former Treasury Secretary to outline the future of our taxation arrangements!

http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consolidated.pdf

*hint: the answer is on page 45.

Yes because the rest of that document received such a detailed and thorough response from government.
And wasn’t the recommendation to change the statutory formula to across the board 20% which is exactly what they did?

Reprobate 4:14 pm 18 Jul 13

Should be a big drop in the number of Canberrans taking pointless day trips to and from the coast/Sydney on weekends in June just to get their annual Km’s over the threshold amount.

Good riddance to a flawed rort.

RedDogInCan 3:54 pm 18 Jul 13

mossrocket said :

It’s not a rort, and it would effect a lot more people than you think…

Tradies for instance…

If anyone is rorting the system it is tradies – do you really think all those tradies need their high powered utes with flashy mags and paint jobs just to cart a few tools around town.

In any case, your genuine tradie isn’t affected because the typical tradie’s van is used for 100% business – it’s not like they use them on holidays.

Holden Caulfield 3:41 pm 18 Jul 13

johnboy said :

If the tax treatment has stood for decades however, and it has significantly reshaped the economy around it, one would like to see it changed after considered consultation and deliberation rather than during an all-nighter to make up the numbers for Kevin’s sound bite.

That’s a far better critique of the change than the one from the self-interested leasing guy. And that took you what, 15 seconds with no planning.

Kind of tells you how poor the arguments are for maintaining what, in some cases, has clearly been little more than a state-sanctioned rort.

Holden Caulfield 3:39 pm 18 Jul 13

“By way of a practical application to explain business usage and the impact to Novated Leasing. If a Nurse, Police Officer or Local, State or Federal Government employee drives to work, parks their car, spends a day working and drives home they will have 0% business use and 100% personal use and will not receive any benefit from salary packaging a car. The thousands of dollars per year that they are currently saving from Novated Leasing will no longer be available to them.”

So what you’re saying is all the people who were claiming their car was for business purposes but in reality thet weren’t using their car for business purposes at all will now be worse off?

Have I got that right, I just want to be clear about this?

arescarti42 3:33 pm 18 Jul 13

mossrocket said :

The FBT salary sacrifice tax grab isn’t just new cars either – anyone can salary sacrifice their car – mine is a 2006 car. It’s not a rort, and it would effect a lot more people than you think…

Tradies for instance…

Well it’ll only affect tradies if they’re not actually using their vehicle for work, in which case it is a rort.

aidan 3:16 pm 18 Jul 13

The proposed, as explained in the excerpt, does not affect people who legitimately use a vehicle for their business.

I’m a fan of measured and considered change, c.f. chaos with the FiT chop and change, but this is a rort pure and simple. How many people know someone who has lent their car to a friend/family member to for a big drive to “get the kms up”?

It is a stupid loophole that encourages people to do unnecessary driving if they are affluent enough to afford it, or just have a personal preference to own a new car every few years.

It was pretty clearly for the high-jump sooner or later, depending on who had the cojones to knock it on the head.

chewy14 3:15 pm 18 Jul 13

johnboy said :

If the tax treatment has stood for decades however, and it has significantly reshaped the economy around it, one would like to see it changed after considered consultation and deliberation rather than during an all-nighter to make up the numbers for Kevin’s sound bite.

+1.
I don’t really care about losing my lease arrangements when they run out, ill simply buy second hand cars like I did previously. But surely this brain fart could have been better thought out?

Or possibly when looking for things to pay for the Carbon tax reduction they could have removed the household compensation that was directly linked to it?

I’d love to see them reduce quite a number of tax breaks, benefits and payments but they need to be.better thought out than this.

Jim Jones 3:13 pm 18 Jul 13

mossrocket said :

It looks like this election will all be about the sound bytes and not about any policy. Maybe the election has already happened in secret and we are all being sent fines for not voting to prop up the economy.

The FBT salary sacrifice tax grab isn’t just new cars either – anyone can salary sacrifice their car – mine is a 2006 car. It’s not a rort, and it would effect a lot more people than you think…

Tradies for instance…

I completely agree that the election will be based on crap. Apparently it’s what we deserve – the ALP polls jumped at the change of leader, so this kind of vapid personality-driven politics is apparently preferable to anything policy-driven for many people.

And I daresay that the policy will be populist and poorly done, like most of the policy that occurred under Rudd.

Doesn’t change the fact that the whining is from vested interests complaining about tightening a loophole in the tax system that enabled rorts. If you can’t justify the fact that you have a car for work purposes (via a logbook – the way that tradies do), then you shouldn’t be able to use it as a tax dodge.

The fact that people have been taking advantage of it for ages doesn’t justify anything. You can’t argue against changes to the tax system because ‘it’s been like this for ages’.

Consultation? Yeah, sure. But inevitably ‘consultation’ becomes the car manufacturers and financial parasites grandstanding and rent-seeking.

mezza76 3:12 pm 18 Jul 13

johnboy said :

If the tax treatment has stood for decades however, and it has significantly reshaped the economy around it, one would like to see it changed after considered consultation and deliberation rather than during an all-nighter to make up the numbers for Kevin’s sound bite.

Yes! If only we had some sort of review… possibly headed by a former Treasury Secretary to outline the future of our taxation arrangements!

http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consolidated.pdf

*hint: the answer is on page 45.

mossrocket 3:00 pm 18 Jul 13

It looks like this election will all be about the sound bytes and not about any policy. Maybe the election has already happened in secret and we are all being sent fines for not voting to prop up the economy.

The FBT salary sacrifice tax grab isn’t just new cars either – anyone can salary sacrifice their car – mine is a 2006 car. It’s not a rort, and it would effect a lot more people than you think…

Tradies for instance…

johnboy 2:55 pm 18 Jul 13

If the tax treatment has stood for decades however, and it has significantly reshaped the economy around it, one would like to see it changed after considered consultation and deliberation rather than during an all-nighter to make up the numbers for Kevin’s sound bite.

Jim Jones 2:54 pm 18 Jul 13

aidan said :

Cry me a river …

Yep … a tax rort is being closed and everyone’s screaming blue murder.

Here’s a tip – if your business relies on a loophole in tax law, then your business is unsustainable.

mossrocket 2:41 pm 18 Jul 13

Well actually he can’t do anything without recalling parliament – so it’s all hot air.

Much like his thought farts about cutting the transition to an ETS by a year… Hasn’t happened, probably won’t…

He isn’t a dictator, no matter what he likes to think. He can’t make up laws without getting them through parliament, and he doesn’t have Green or LNP support…

aidan 2:33 pm 18 Jul 13

Cry me a river …

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