FT CAR VALUATION CHANGES
18 July 2013
The government has announced that the fringe benefits tax (FBT) statutory formula method is to be abolished for all new contracts entered into from yesterday. This means that only the log book (operating cost) method will continue to be available to calculate fringe benefits tax.
This is a major additional administrative burden compared to the previous statutory formula method. It will also mean higher FBT impost.
With no valid log book, presumably the full running costs of the car will be subject to FBT. The types of costs required to be tracked for each car include fuel, insurance, registration, servicing, repairs and lease payments. For owned cars, depreciation and an imputed interest amount must be calculated.
Employees who salary package cars will also be severely impacted. The tax savings from packaging cars have traditionally come through use of the statutory formula method. These savings will be eliminated, with potentially only minimal tax savings available from GST credits or associate lease cars.
Legislation for these changes will obviously need to be passed before they become effective. However, with the government announcing yesterday as the effective date for the changes, this puts all new car salary packaging arrangements on indefinite hold,
For further information, please submit all questions through your account page.