18 July 2013

What Kevin's mad thrashing means to your novated lease

| johnboy
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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.

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Althought this is annoying for some, weaning Australia off middle class welfare is a good thing longer term.

Diggety said :

Long term subsidies….. It’s really the modern day Aus.

Trust me, we’re fucked if we follow this MO.

Individuals, businesses, industries, politicians.. anyone involved in Australia needs to reconsider the hand-me-out mentality of yesteryear.

(apologies)

Long term subsidies….. It’s really the modern day Aus.

Trust me, we’re f***ed if we follow this MO.

Individuals, businesses, industries, politicians.. anyone involved in Australia needs to consider the hand-me-out mentality of yesteryear.

Postalgeek said :

kagey said :

Why does “it’s a rort” sound like class envy here?

Here’s a completely unsupported hypothesis that will make your brow furrow: what if some of the critics of middle-class welfare were middle class. A form of class green-on-blue, if you will.

Talking about middle class welfare, I note the sentence given to the mother of Kiesha Wieppart – a Mt Druitt woman who had a child she couldn’t afford or care for due to having $5500.00 dollars waved in front of her in the form of the Howard government’s Baby Bonus in 2005. Countless babies murdered and dumped in bins as the low life bogans (“Howard Battlers”) were pandered to in one of the worst pork barrelling exercises on record.

If Kevin Rudd apologised to the Stolen Generation will Tony Abbott apologise to the murdered generation?

JC said :

kagey said :

Why does “it’s a rort” sound like class envy here?

I used the term myself AND I lease and have leased in the past. So does that make me envious of myself?

Bottom line the whole thing had very sound intentions when introduced (just like negative gearing), which was to keep the local industry going without the direct money they have now given to them, but when they changed the laws so the rules applied to non Australia made cars the whole thing became a rort.

I mean to say this whole statutory method is making an assumption that there is a level of business use. I will tell you know neither my current nor previous cars EVERY saw any business use so please explain how that is not a rort?

How do you figure that the statutory method assumes some business use? Do you have a link, because I can’t find anything that says other than the statutory method simply not differentiating between business and private use.

All this ‘it’s a RORT’ stuff just sounds ridiculous to me. Even based on the definition given earlier – work (a system) to obtain the greatest benefit while remaining within the letter of the law. Nobody who is taking out a novated lease is working the system at all. Nobody is having to find loopholes, or jump through any hoops to gain the benefits that are proposed to be removed – they’re simply making use of perfectly legal options to get a car. It’s not like this is something new – people have been salary sacrificing this stuff for years. Businesses have grown up around this option. Anyone would think that to take out a lease, you needed to know how to contact just the right company and know the secret handshake…

I don’t even particularly care about this change – I leased 7 or 8 years ago, haven’t since, and can’t see myself doing it again any time soon regardless of whether this change happens or not. ‘It’s a rort’ doesn’t sound like class envy at all to me – just incorrect use of English.

kagey said :

Why does “it’s a rort” sound like class envy here?

I used the term myself AND I lease and have leased in the past. So does that make me envious of myself?

Bottom line the whole thing had very sound intentions when introduced (just like negative gearing), which was to keep the local industry going without the direct money they have now given to them, but when they changed the laws so the rules applied to non Australia made cars the whole thing became a rort.

I mean to say this whole statutory method is making an assumption that there is a level of business use. I will tell you know neither my current nor previous cars EVERY saw any business use so please explain how that is not a rort?

kagey said :

Why does “it’s a rort” sound like class envy here?

Here’s a completely unsupported hypothesis that will make your brow furrow: what if some of the critics of middle-class welfare were middle class. A form of class green-on-blue, if you will.

Why does “it’s a rort” sound like class envy here?

Anyway, what I was going to say was :
While the economic impacts might be many and varied, it is interesting to see that the Kruddler mark 2 has impacted several sectors in this thought bubble. Vehicle manufacturing, vehicle leasing, and the public service (including teaching, nursing, police). Vehicle manufacturing and the public service are two of the sectors in Australia that remain significantly unionised. Correct me if I’m wrong but I thought unionised workers were the natural constituency of the ALP. On first impression, this looks like the ALP could care less about the voting intentions of these workers. The question is why would the ALP seem so casual towards this constituency – are they that rusted-on? The unions remain a significant channel of donations to the ALP after all, and fewer union workers means lower donations. I can’t see the political upside to this unless the ALP thinks it can win more votes by reducing the carbon tax than they will lose through sticking a fork in novated leasing.

chewy14 said :

OK the ‘class warfare’ schtick is bogus and there’s myriad tax concessions, loopholes and benefits that should be scrapped but even you must realise there’s a difference between taking more revenue off productive citizens vs cutting benefits to non productive citizens.

They produced children…

IP

Moving a group of welfare recipients to a program paying less for good policy reasons is a bit different yo a raft of measures targeting a certain class of folk at the household bottom line is a declaration of war.

Leasing cars is a niche industry providing a non-essential service. I don’t see the tragedy here, so a few dozen people have to find new jobs, BFD. It sucks for them, but now they can go get jobs that actually benefit the community.

Jim Jones said :

Postalgeek said :

Pfff, those fking Reasonably-OK wankers are fking leeches, sucking off us Mildly-OK Aussie taxpayers.

Odd how no-one ever uses the phrase ‘class war’ when talking about cuts to the genuine poor: unemployment benefits, pensions, and so on.

Talk about cutting middle-class welfare and its ‘CLASS WAR CLASS WAR CLASS WAR’. Or even hint at raising the tax level for the wealthy and the shrill shrieks of ‘CLASS WAR’ will echo throughout the media (well … News Ltd, anyway).

From this I can only assume that ‘class war’ is when the benefits disproportionately flowing to the powerful and wealthy are under threat.

Apparently, cutting the rate of welfare of single mothers is okay because they really need to feel the discipline of the market rather than enjoy the support of the taxpayer, but it is ‘class war’ to wonder why tax concessions costing billions flow to high-income earners.

OK the ‘class warfare’ schtick is bogus and there’s myriad tax concessions, loopholes and benefits that should be scrapped but even you must realise there’s a difference between taking more revenue off productive citizens vs cutting benefits to non productive citizens.

thebrownstreak693:36 pm 19 Jul 13

DEY TERK ER BENNERFERTS!

Postalgeek said :

Pfff, those fking Reasonably-OK wankers are fking leeches, sucking off us Mildly-OK Aussie taxpayers.

Odd how no-one ever uses the phrase ‘class war’ when talking about cuts to the genuine poor: unemployment benefits, pensions, and so on.

Talk about cutting middle-class welfare and its ‘CLASS WAR CLASS WAR CLASS WAR’. Or even hint at raising the tax level for the wealthy and the shrill shrieks of ‘CLASS WAR’ will echo throughout the media (well … News Ltd, anyway).

From this I can only assume that ‘class war’ is when the benefits disproportionately flowing to the powerful and wealthy are under threat.

Apparently, cutting the rate of welfare of single mothers is okay because they really need to feel the discipline of the market rather than enjoy the support of the taxpayer, but it is ‘class war’ to wonder why tax concessions costing billions flow to high-income earners.

bigred said :

Jim Jones just does not get it. If the Government wants more revenue it should just raise the rate, as opposed to scheming against various groups without considering consequences and perverse behaviour. It is called being transparent.

So … you don’t understand what ‘class war’ means and you want your tax rort (which you don’t appear to understand either) to continue and you’re absolutely livid and the gummint is SCHEMING and PERVERSE.

Got it.

Next caller please.

Pfff, those fking Reasonably-OK wankers are fking leeches, sucking off us Mildly-OK Aussie taxpayers.

Jim Jones just does not get it. If the Government wants more revenue it should just raise the rate, as opposed to scheming against various groups without considering consequences and perverse behaviour. It is called being transparent.

bigred said :

Yes Jim Jones, class war is what it is. Entirely declared on those who are doing reasonably ok. The cumulative impact is well into the thousands now.

Lol. I was unaware that ‘doing reasonably okay’ was a class.

Presumably getting rid of the baby bonus is also an instance of ‘class war’.

Heaven forbid that anyone should remove all this middle-class welfare – that would be completely ‘un-Australian’ wouldn’t it.

Yes Jim Jones, class war is what it is. Entirely declared on those who are doing reasonably ok. The cumulative impact is well into the thousands now.

Perhaps with some consultation and a phase-out, a couple of hundred sudden job losses in the car lease industry could have been made not quite so sudden …

Felix the Cat11:36 am 19 Jul 13

dungfungus said :

Does anyone know if any lycra brigade enthusiasts have their expensive carbon fibre bikes on novated leases?
I know a couple SESs who pedal to work on NASA inspired bikes so would they have these weaved into their salary packages somehow?
Pedal Power preparing a media release now I expect?

Don’t think so in Australia but certainly in UK – http://www.cyclescheme.co.uk/

dungfungus said :

Does anyone know if any lycra brigade enthusiasts have their expensive carbon fibre bikes on novated leases?
I know a couple SESs who pedal to work on NASA inspired bikes so would they have these weaved into their salary packages somehow?
Pedal Power preparing a media release now I expect?

I don’t know that bikes can be salary sacrificed, at least not in the same way as a car or motorbike, but Defence are one department who do bike loans for their staff. AFAIK though, the repayments that come out of the employees salary are post-tax, so essentially they’re given an interest-free loan to purchase a bike.

This is the issue when a government tries to do something that is probably for the better good of society. Yeah it s*cks if you are used to leasing and in Canberra it was common, but with the reduction in tax rates and the rise of FBT, it was going to be less favourable. Also everytime i did the figures the amount saved was a few thousand, so not insignificant, but still if you can afford to buy a new car via a lease, its not like you are hard done by in Life in general.

And this is the real issue with politics. The less we rely on these government subsidised programs and cash handouts the better. Governments waste so much money this way. Don’t even get me started on the amount of waste put into making boat people the political fight that it is.

davo101 said :

dungfungus said :

I know a couple SESs who pedal to work on NASA inspired bikes

So there is a 1 in 50 chance the bicycle will explode in a massive fire ball and kill the rider?

Only if their heat shields fail.

dungfungus said :

I know a couple SESs who pedal to work on NASA inspired bikes

So there is a 1 in 50 chance the bicycle will explode in a massive fire ball and kill the rider?

aidan said :

Cry me a river …

I know. Imagine having to prove that you are actually using a vehicle for business use before making a claim (and once every five years…sob…for 12 weeks…wail).

mossrocket said :

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

Still, it’s a very convenient excuse to fire half your staff.

Jim Jones said :

mezza76 said :

chewy14 said :

mezza76 said :

My point was that these were not made up, out-of-the-blue ideas. Just because a government doesn’t implement a report/review recommendation immediately, doesn’t mean it won’t get a run in the future.

“Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.” This fits with the end of page 45-and 46 regarding the distortions of operating v statutory methods. “The existing statutory formula for valuing car fringe benefits applies a reduced taxable
value the further a vehicle is driven. At the margin, this may encourage individuals to
travel unnecessary kilometres.” Although “while the operating cost method provides a more accurate valuation than the statutory formula, it imposes a high compliance burden for users with low levels of business use” – remains a valid concern.

I’m not a fan of providing a subsidy for someone’s car use, which is often for private use rather than business use. I mean, that’s even how Easifleet are describing it.

And the consultation stuff if just crap. Nobody consulted me on the efficiency dividend…

And I’m not a fan of subsidising other people for many other benefits and entitlements, quite a few that were also covered in the tax review.

My point was that the review was a very detailed look at our tax system and deserved a detailed and well thought out response from government rather than the lip service it received. it most definitely wasn’t designed so the government could cherry pick a revenue measure every time it was politically convenient. I also note that they haven’t gone near much bigger ‘rorts’ that are covered in the review because they would cost them far too many votes.

If this move was part of a consolidated response covering tax in general then it would probably be a sound move but its extremely hard to see this as anything but a knee jerk response to an immediate political need.

The gravy train is still very much in motion but no political party has the balls to seriously make the needed changes.

Agree. And the fact that the household ‘compensation’ remains irks me to the core.

‘Compensation’ is politician-speak for ‘electoral bribe’, right?

This whackjob agrees with you (for once) on that.

Does anyone know if any lycra brigade enthusiasts have their expensive carbon fibre bikes on novated leases?
I know a couple SESs who pedal to work on NASA inspired bikes so would they have these weaved into their salary packages somehow?
Pedal Power preparing a media release now I expect?

mezza76 said :

chewy14 said :

mezza76 said :

My point was that these were not made up, out-of-the-blue ideas. Just because a government doesn’t implement a report/review recommendation immediately, doesn’t mean it won’t get a run in the future.

“Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.” This fits with the end of page 45-and 46 regarding the distortions of operating v statutory methods. “The existing statutory formula for valuing car fringe benefits applies a reduced taxable
value the further a vehicle is driven. At the margin, this may encourage individuals to
travel unnecessary kilometres.” Although “while the operating cost method provides a more accurate valuation than the statutory formula, it imposes a high compliance burden for users with low levels of business use” – remains a valid concern.

I’m not a fan of providing a subsidy for someone’s car use, which is often for private use rather than business use. I mean, that’s even how Easifleet are describing it.

And the consultation stuff if just crap. Nobody consulted me on the efficiency dividend…

And I’m not a fan of subsidising other people for many other benefits and entitlements, quite a few that were also covered in the tax review.

My point was that the review was a very detailed look at our tax system and deserved a detailed and well thought out response from government rather than the lip service it received. it most definitely wasn’t designed so the government could cherry pick a revenue measure every time it was politically convenient. I also note that they haven’t gone near much bigger ‘rorts’ that are covered in the review because they would cost them far too many votes.

If this move was part of a consolidated response covering tax in general then it would probably be a sound move but its extremely hard to see this as anything but a knee jerk response to an immediate political need.

The gravy train is still very much in motion but no political party has the balls to seriously make the needed changes.

Agree. And the fact that the household ‘compensation’ remains irks me to the core.

‘Compensation’ is politician-speak for ‘electoral bribe’, right?

bigred said :

The class was continues.

Class war?

How in all hell could this be classified as ‘class war’?

This phrase has been so overused in Australian political rhetoric that it’s become completely meaningless. Any time a party does anything that effects anyone in society, the other party will immediately start shrieking ‘class war class was class war’.

I propose an immediate embargo on the term. From this point onwards, anyone using the term will be shipped off to revolutionary France to discuss class war with Robespierre.

chewy14 said :

mezza76 said :

My point was that these were not made up, out-of-the-blue ideas. Just because a government doesn’t implement a report/review recommendation immediately, doesn’t mean it won’t get a run in the future.

“Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.” This fits with the end of page 45-and 46 regarding the distortions of operating v statutory methods. “The existing statutory formula for valuing car fringe benefits applies a reduced taxable
value the further a vehicle is driven. At the margin, this may encourage individuals to
travel unnecessary kilometres.” Although “while the operating cost method provides a more accurate valuation than the statutory formula, it imposes a high compliance burden for users with low levels of business use” – remains a valid concern.

I’m not a fan of providing a subsidy for someone’s car use, which is often for private use rather than business use. I mean, that’s even how Easifleet are describing it.

And the consultation stuff if just crap. Nobody consulted me on the efficiency dividend…

And I’m not a fan of subsidising other people for many other benefits and entitlements, quite a few that were also covered in the tax review.

My point was that the review was a very detailed look at our tax system and deserved a detailed and well thought out response from government rather than the lip service it received. it most definitely wasn’t designed so the government could cherry pick a revenue measure every time it was politically convenient. I also note that they haven’t gone near much bigger ‘rorts’ that are covered in the review because they would cost them far too many votes.

If this move was part of a consolidated response covering tax in general then it would probably be a sound move but its extremely hard to see this as anything but a knee jerk response to an immediate political need.

The gravy train is still very much in motion but no political party has the balls to seriously make the needed changes.

Agree. And the fact that the household ‘compensation’ remains irks me to the core.

CraigT said :

chewy14 said :

Reprobate said :

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.

The statutory formula had already been changed to a flat 20%. There was no extra benefit in ‘getting your kilometres up’.

When did that happen?

Strike that. You must be wrong. My latest lease, on which the ink is still drying, offers different rates against FBT depending on three categories of mileage.I’m sure they would tell me if any of that has changed.

The funny thing about this episode is that Rudd has managed to back Hockey into a corner: “This will hurt average Australians!!”, Hockey says on the radio, credibility gushing from yet another cut.

Hahaha. Another nifty move from Rudd. I do like his style.

I think Hockey and co. should stick to broadcasting idiocy to con the simpletons – it’s not going to work on the rest of us. You’d have to be completely retarded to consider voting for that shower – and as for Canberrans, I mean, the Liberals have explicitly promised to **** us up. Are you going to vote for that?

Do you pay attention to your lease? By ink is still drying, I’m guessing you mean before April 1st 2013.

That statutory formula was being phased in to a flat 20%. As of April 1st 2013 its 20% for New leases up to 40000kms a year and 17% above that.

New leases from April 1st 2014 were to be 20% flat for everyone regardless of kilometres.

CraigT said :

When did that happen?

Strike that. You must be wrong. My latest lease, on which the ink is still drying, offers different rates against FBT depending on three categories of mileage.I’m sure they would tell me if any of that has changed.

Bzzt the other poster is right and you are wrong. That said I can see why you think it hasn’t changed, because the law changed in 2011, but it doesn’t become a flat 20% across the board until April 2014.

What they have been doing is since May 2011 they have been gradually increasing the rates. So prior to May 2011 someone doing 40,000km+ per year paid 7%. This changed to 10% in May 2011, 13% in April 2012, 17% in April 2013 and finally 20% in April 2014.

For those doing 25,000 to 39,999 they paid 11% prior to May 2011, this then changed to 14% in May 2011, then 17% in April 2012 and stopped at 20% in April 2013.

Under 25,00 it was always 20,000 anyway.

For clarity these rates only changed for those entering into new contracts based on the year the contract was started.

Of course this is now all out the window anyway.

The other

I have absolutely no issue with people paying tax on private usage of a motor vehicle paid for with pre-tax dollars.

I pay for my car with post-tax dollars and claim back my business usage. Sounds like an even playing field to me.

The class was continues. Waiting for the cannon fodder at the centrals to start squealing about the cost of the cars they park in the triangle going up to coincide with them paying for their own parking.

chewy14 said :

Reprobate said :

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.

The statutory formula had already been changed to a flat 20%. There was no extra benefit in ‘getting your kilometres up’.

When did that happen?

Strike that. You must be wrong. My latest lease, on which the ink is still drying, offers different rates against FBT depending on three categories of mileage.I’m sure they would tell me if any of that has changed.

The funny thing about this episode is that Rudd has managed to back Hockey into a corner: “This will hurt average Australians!!”, Hockey says on the radio, credibility gushing from yet another cut.

Hahaha. Another nifty move from Rudd. I do like his style.

I think Hockey and co. should stick to broadcasting idiocy to con the simpletons – it’s not going to work on the rest of us. You’d have to be completely retarded to consider voting for that shower – and as for Canberrans, I mean, the Liberals have explicitly promised to **** us up. Are you going to vote for that?

mezza76 said :

My point was that these were not made up, out-of-the-blue ideas. Just because a government doesn’t implement a report/review recommendation immediately, doesn’t mean it won’t get a run in the future.

“Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.” This fits with the end of page 45-and 46 regarding the distortions of operating v statutory methods. “The existing statutory formula for valuing car fringe benefits applies a reduced taxable
value the further a vehicle is driven. At the margin, this may encourage individuals to
travel unnecessary kilometres.” Although “while the operating cost method provides a more accurate valuation than the statutory formula, it imposes a high compliance burden for users with low levels of business use” – remains a valid concern.

I’m not a fan of providing a subsidy for someone’s car use, which is often for private use rather than business use. I mean, that’s even how Easifleet are describing it.

And the consultation stuff if just crap. Nobody consulted me on the efficiency dividend…

And I’m not a fan of subsidising other people for many other benefits and entitlements, quite a few that were also covered in the tax review.

My point was that the review was a very detailed look at our tax system and deserved a detailed and well thought out response from government rather than the lip service it received. it most definitely wasn’t designed so the government could cherry pick a revenue measure every time it was politically convenient. I also note that they haven’t gone near much bigger ‘rorts’ that are covered in the review because they would cost them far too many votes.

If this move was part of a consolidated response covering tax in general then it would probably be a sound move but its extremely hard to see this as anything but a knee jerk response to an immediate political need.

The gravy train is still very much in motion but no political party has the balls to seriously make the needed changes.

Negative Gearing next, anyone?

Mind you, it would have been more appropriate to pay for the Carbon Tax to ETS change by getting rid of some of the fossil fuel subsidies to mining companies and big transport companies. But perhaps Mr Rudd is steering clear of the mining companies for now, given his 2010 experiences.

IP

dungfungus said :

“…other FBT rorts?…..”
You mean like the trade unions who also have FBT exemptions?

Guess so, but let us not also forget that employee associations are also exempt and there are whole raft of rorts that big and not so big business gets away with too.

JC said :

Holden Caulfield said :

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.

The original premise for it’s introduction was quite sound. Back then it only applied to Australian made cars and was an indirect form of subsidy to stimulate the local car building industry. But that change years ago when it was extended to non Australian made cars and became the ‘rort’ that it is.

Must admit I myself do it, though to be honest the last lot of FBT changes the government made to car leasing where they changed to a fixed rate rather than variable based on kilometres travelled meant that this would be the last time I did it anyway.

Now maybe the government should look at some of the other FBT rorts, for example where workers for charities (including nursing homes etc) can in most cases salary sacrifice up to 100% of their salary on things like the mortgage and credit cards. It essentially means they can pay 0 income tax, and because of the FBT status of the employee there is no FBT liability.

“…other FBT rorts?…..”
You mean like the trade unions who also have FBT exemptions?

Holden Caulfield said :

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.

The original premise for it’s introduction was quite sound. Back then it only applied to Australian made cars and was an indirect form of subsidy to stimulate the local car building industry. But that change years ago when it was extended to non Australian made cars and became the ‘rort’ that it is.

Must admit I myself do it, though to be honest the last lot of FBT changes the government made to car leasing where they changed to a fixed rate rather than variable based on kilometres travelled meant that this would be the last time I did it anyway.

Now maybe the government should look at some of the other FBT rorts, for example where workers for charities (including nursing homes etc) can in most cases salary sacrifice up to 100% of their salary on things like the mortgage and credit cards. It essentially means they can pay 0 income tax, and because of the FBT status of the employee there is no FBT liability.

Deref said :

I’ve recently come back from the US, and all the car ads that I saw over there were for leasing. I have no idea whether there are tax concessions, but if the ads are anything to go by, that’s the scheme that they’re pushing. The leases all seem to include servicing and insurance and seemed to vary between about $300 and $400 a month for three years.

I know that’s not necessarily pertinent to this specific issue, but where the US leads Australia always follows so we can expect a similar trend to start here any time now.

Leasing is just another form of finance at the end of the day. Here in Aus the core issue isn’t the lease, but the tax rules surrounding salary sacrafice to pay for leasing.

I’ve recently come back from the US, and all the car ads that I saw over there were for leasing. I have no idea whether there are tax concessions, but if the ads are anything to go by, that’s the scheme that they’re pushing. The leases all seem to include servicing and insurance and seemed to vary between about $300 and $400 a month for three years.

I know that’s not necessarily pertinent to this specific issue, but where the US leads Australia always follows so we can expect a similar trend to start here any time now.

chewy14 said :

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?

My point was that these were not made up, out-of-the-blue ideas. Just because a government doesn’t implement a report/review recommendation immediately, doesn’t mean it won’t get a run in the future.

“Currently people have the choice of using the Statutory (20% of FBT) Method or the Operating Method.” This fits with the end of page 45-and 46 regarding the distortions of operating v statutory methods. “The existing statutory formula for valuing car fringe benefits applies a reduced taxable
value the further a vehicle is driven. At the margin, this may encourage individuals to
travel unnecessary kilometres.” Although “while the operating cost method provides a more accurate valuation than the statutory formula, it imposes a high compliance burden for users with low levels of business use” – remains a valid concern.

I’m not a fan of providing a subsidy for someone’s car use, which is often for private use rather than business use. I mean, that’s even how Easifleet are describing it.

And the consultation stuff if just crap. Nobody consulted me on the efficiency dividend…

goggles13 said :

how is minimising my tax by legal means a rort?

how is salary packaging anything (such as laptops, mortgages, super etc) a rort?

http://oxforddictionaries.com/definition/english/RORT
Pronunciation: /r??t/
verb
• work (a system) to obtain the greatest benefit while remaining within the letter of the law.

how is minimising my tax by legal means a rort?

there is nothing illegal with me salary packaging a vehicle and I have never had to make any false claim that it is used for business purposes. my registration is private, not business.

how is salary packaging anything (such as laptops, mortgages, super etc) a rort?

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.

Exactly.

Reprobate said :

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.

The FBT year finishes in March, not June. I would guess the trips to the coast/Sydney in June have more to do with the public holiday and school holidays. Plus of course, there hasn’t been a need to “get the kms up” for a while now. Possibly shouldn’t comment on something if you don’t know the first thing about it.

Reprobate said :

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.

The statutory formula had already been changed to a flat 20%. There was no extra benefit in ‘getting your kilometres up’.

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?

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.

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 Caulfield3:41 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 Caulfield3:39 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?

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.

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.

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.

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.

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.

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…

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.

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.

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…

Cry me a river …

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