FBT on cars “Statutory Formula” abolished

The Federal Government has announced the abolition of the Statutory Formula for car fringe benefits.

When?

The changes apply for all new arrangements contracted after 16 July 2013 and will be effective from 1 April 2014.

Existing arrangements remain OK

Arrangements contracted before 16 July 2013, and not materially varied after the announcement, can continue to use the Statutory Formula method.

Change of Government?

As Federal Parliament will not sit before the next Federal election, the status of the proposed changes, in the event that Labor is not returned to power, is uncertain.

Immediate effect?

The announced changes could mean an increase in both the:

  • fringe benefits tax payable and
  • compliance costs for business.

Employers will now have to use the “Operating Cost” method to establish the fringe benefit amount for new arrangements. This means that employees must now maintain logbooks and there will be more record keeping as employers track expenses for each vehicle.  In most cases there will be a higher taxable value of the benefit provided which translates into more tax payable.

 Flow-on effect?

Employers and employees in these situations will be hard hit by these proposed changes. 

  • Less take-home pay – Employees paid on a “total package” remuneration structure will be required to meet the extra fringe benefits tax cost out of their package, which means that their take-home pay will be reduced.
  • Medicare and Centrelink – In addition, with the increase in taxable FBT values there will be a flow on to “adjustable taxable income” for various concessions and benefits such as Medicare and Centrelink etc.
  • Payroll Tax and Workcover – In addition payroll tax and Workcover costs will increase where the FBT taxable value is included in taxable wages for these purposes.

If you need help understanding how the change affects you and your business or need some advice on how the Operating Cost method works, then call the office on 03 9585 7555 oremail us

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