Changes to FBT rules

[BroadyFord]

Holden officially joins Fringe Benefit Tax crackdown fight

http://m.adelaidenow.com.au/news/sou...-1226680907339

HOLDEN has joined the fight against the changes to company-car tax rules 24 hours after the Rudd Government announced a controversial overhaul of Fringe Benefits Tax requirements.

It took Holden the better part of yesterday and today to calculate the true impact on its business, not least of which is an estimated $5 million hit to its bottom line just to cover the FBT on its own company fleet, let alone the expected drop in demand for its locally-made vehicles.

“Holden's initial assessment of the proposed fringe benefits tax changes indicates it will have a significant impact on our business,” said Holden spokesman Sean Poppitt.

“While we don’t yet know the size of the impact on sales of new Holdens, anything that reduces new vehicle sales is detrimental to our operations and a cause for concern.”

The comments echo those made by Toyota and the Federal Chamber of Automotive Industries, but Holden had been conspicuously silent on the issue because it is in the middle of sensitive negotiations with government over funding for manufacturing beyond 2016.

Up to 70 per cent of locally-made Holdens and up to 80 per cent of locally-made Toyotas are bought by fleets, but leasing experts predict that many company car drivers will switch to cheaper or older cars to avoid paying between $1400 and $4000 FBT each year.

Premier Jay Weatherill said he had discussed the issue today with Treasurer Chris Bowen and Bob Carr.

"Any issue which creates significant concerns for the car industry is ultimately a concern for the South Australian Government," Mr Weatherill said.

"I understand that the Commonwealth is in discussions with the industry. I am meeting with Minister Carr on Friday to discuss the issue in person."

[flappist]

Originally Posted by ILLaViTaR

But that's kind've an issue to ie. how "disposable/little value" these cars have to their owners because of the tax benefits (especially when the benefits are abused). If they held onto them a bit longer the country would be much richer by the billions. Although a 3 year old car under 20k is a dream for someone like me, I'd prefer the government give me back half my tax for it.

Imagine if PAYG earners received the same/similiar tax benefits for a company car/transportation to and from work. My father pays 47% on the dollar to the government full time with no vehicle entitlements while they pay 30% flat and then receive the vehicle benefits on top. Fact is he actually pays 30-40k in tax per annum can't even claim his own work clothes let alone a car while most small business pay less tax overall and receive all these entitlements. A 3yr old V8 is a kick to the teeth to him when he contributes more and never got the feeling of owning a new car (something that's bothered him that others take for granted). A feeling that soon gets old for business owners once these cars start getting recycled. I don't see how he is any less entitled to it than them.

My neighbour owns a window trade he inherited from his parents. He has claimed a Holden grange, 90k+ BMW (wifes) and a 4x4 ute (must be doing windows in bunyip state forest).

Now he has appointed his wife as the "company director" to the business and as far as the ato is concerned she works full time hours from home... Well reality check she's a housewife who sits in the pool outside (probably a tax deduction too somehow) sunbaking all day while the BMW and grange sit in driveway everyday depreciating away but then of course depreciation on such a high asset is nullified to them obviously as the depreciation is probably flat rate or some crap so they pull more tax back from a vehicle with a greater depreciation). I'm sure this is highly illegal particularly the company director housewife front, however everyone does it (that's the mentaility).

Sounds like a great idea. Are you prepared to give up your paid holidays with loading, sick leave and guaranteed pay packet every week for it? I suspect not.....

There is a very simple way to fix this whole issue of tax. Every time money moves in or out of a bank account it gets taxed at a tiny percentage i.e. 1 or 2 percent. The bank is responsible for collecting all the tax.
There are no tax deductions at all for anything and no tax exemptions.

If you do not spend any money you will not pay tax.

Of course there are a few down sides to this:

The tax department would go from several hundred thousand people to half a dozen.
The whole "tax return" industry would disappear.
Everyone would pay the same amount of tax which would REALLY annoy most of the corporates especially those who currently move all their profits offshore.
Some people would be killed during robberies because they were so stupid that to save $100 in tax they carried $10k in cash.
And last but not least the whole whinge whinge moan it is all unfair association would have to find something else to complain about.....

[Road_Warrior]

Funny how there has been silence from GovCo over the uproar since the announcement. I wonder if they're considering a backdown?

[Brazen]

Originally Posted by Road_Warrior

Funny how there has been silence from GovCo over the uproar since the announcement. I wonder if they're considering a backdown?

I have been surprised by the real negative reaction to this, i actually thought it would be an easy target for the Government. I think what has helped the car makers is that there has been concerted backlash from many different sectors - employers, finance, leasing, retail.

I wouldn't be surprised if there was some policy 'fine tuning'.

[ute83]

Originally Posted by flappist

Sounds like a great idea. Are you prepared to give up your paid holidays with loading, sick leave and guaranteed pay packet every week for it? I suspect not.....

There is a very simple way to fix this whole issue of tax. Every time money moves in or out of a bank account it gets taxed at a tiny percentage i.e. 1 or 2 percent. The bank is responsible for collecting all the tax.
There are no tax deductions at all for anything and no tax exemptions.

If you do not spend any money you will not pay tax.

Of course there are a few down sides to this:

The tax department would go from several hundred thousand people to half a dozen.
The whole "tax return" industry would disappear.
Everyone would pay the same amount of tax which would REALLY annoy most of the corporates especially those who currently move all their profits offshore.
Some people would be killed during robberies because they were so stupid that to save $100 in tax they carried $10k in cash.
And last but not least the whole whinge whinge moan it is all unfair association would have to find something else to complain about.....

Wasn't that brought up by Pauline a few years ago?

[BroadyFord]

Wow...

‘We’re looking at 100 redundancies by Friday’: Rudd’s FBT changes cause salary packaging chaos

http://www.brw.com.au/p/business/mid...MCUHlijM3RLWuK

The managing director of one of Australia’s leading independent salary packaging firms says he will be forced to make 100 staff redundant by the end of the week unless the Rudd government is prepared to delay its proposed changes to fringe benefit tax (FBT) deductions for vehicles.

Paul King, managing director of Selectus, says he will be forced to lay off 100 staff on Friday and predicts there will be 2000 redundancies across the salary packaging sector by the end of July. After speaking with local car manufacturers yesterday, King says one car maker will be forced to halt production of one of their vehicles as a result of the change; King believes 20,000 jobs could be lost across the wider automotive sector by Christmas.

“The only way it can be avoided is if there is an indication that this proposal will move into a phase of consultation and there’s a stay of the changes,” King told BRW.

Prime Minister Kevin Rudd announced on Tuesday that the “statutory” method for claiming an FBT deduction for vehicle expenses – based on a flat rate of 20 per cent of the cost of the car – would no longer be allowed, with all claims required to be supported by a logbook under what is known as the “operational” method.

The move will save the government $1.8 billion over the next four years and help pay for the government’s decision to move from the carbon tax to a market-based emissions trading scheme in July 2014, one year earlier than planned.

Tax experts have slammed the move as a “major blow” that will lead to a big increase in the administrative burden for employees who use work vehicles. Car makers are also upset at what is seen as another blow to the reeling sector.

But the biggest losers appear to be the hundreds of companies that set up novated leasing and salary packaging arrangements for employee vehicles.

Business stopped immediately

Peter Moore from Melbourne group Leasexpress, says that while the changes do not apply until April 2014, all contracts entered into from the day of the announcement and run into that period are covered by the changes.

“Because they became effective yesterday, it means we really can’t write any business on a novated lease because we can’t give our customers the correct advice at the moment,” Moore says.

“In essence, it’s virtually turned the tap off for this business. We’ve got 15 staff and they are on pins and needles.”

The problem is even greater at the bigger salary packaging groups. Moore says many of their staff would be “technically redundant” this morning.

McMillan Shakespeare, which operates under the brand Maxxia, is one of the leaders of the industry. Its shares dived 15 per cent to $15.36 yesterday before the company was put into a trading halt. The company warned the Rudd changes would have a “material impact” on its fortunes and will now evaluate the implications of the announcement.

That’s a familiar story across the issue. Industry lobby groups, including the Australian Salary Packaging Industry Association, are furiously trying to get details about the changes. The association’s president, Leigh Penberthy, is furious about the lack of consultation from government.

“There’s been no consultation with anyone. This has come as a complete surprise to the industry and we believe these changes will hurt jobs.

“There are still a lot of questions that remain unanswered. We have connections within the ATO and connections with Treasury that we’ll talk to regarding our concerns.”

Paul King is also angry at what he sees as policy on the run from “the same old Rudd”.

‘No consultation whatsoever’

“I know Kevin Rudd said yesterday that there have been weeks of consultation. But that’s frankly contemptuous given he’s only been back as PM a few weeks. There was no consultation whatsoever.”

King and Penberthy are also furious that the government has painted the FBT concessions as a perk for high-income earners. King and Penberthy say the average holder of a novated lease earns under $70,000 and buys a car worth less than $35,000. Those averages have not changed for a decade.

“This is a not an executive rort. These are mums and dads and this Labor government knows that,” King says. “Our typical customer is a teacher or a public servant. These are the core constituency of the Labor party.”

Penberthy, who is also the chief executive of Lease Plus, says he plans to spend the next few days lobbying the government and the media. But he will also need to face the realities of this change.

“We’ll be putting people on leave first. But if things aren’t resolved very quickly, people will just stop buying cars and the business will stop.”

King is also hoping to make as much noise as possible in the coming days to try and get some sort of delay to the changes, and prevent redundancies.

“I am going to be working as hard for their jobs as I possibly can.”

I never ever in a million years thought the Rudd Govt would be more detrimental to the auto industry than the Libs!

[flappist]

Originally Posted by ute83

Wasn't that brought up by Pauline a few years ago?

I wonder where she got the idea......

[Brazen]

Originally Posted by flappist

I wonder where she got the idea......

Hmmm, wait a minute. Notice how you never see Flappist and Pauline in the same room at the same time?

[Road_Warrior]

Originally Posted by Brazen

I have been surprised by the real negative reaction to this, i actually thought it would be an easy target for the Government. I think what has helped the car makers is that there has been concerted backlash from many different sectors - employers, finance, leasing, retail.

I wouldn't be surprised if there was some policy 'fine tuning'.

That's what I'm thinking. They probably thought it would be an easy target with little resistance, save for objections from a few leasing companies and maybe some grizzling from the MTA. But I don't think they were expecting an automotive version of World War 3 in the space of a week!

[Brazen]

Originally Posted by Road_Warrior

That's what I'm thinking. They probably thought it would be an easy target with little resistance, save for objections from a few leasing companies and maybe some grizzling from the MTA. But I don't think they were expecting an automotive version of World War 3 in the space of a week!

With that kind of pressure it is a once in a blue moon opportunity for the local car makers to get some kind of concession - like increase in subsidies or even an Australian made exemption on the FBT stat formula cut.

If you could only salary sacrifice Australian built, I don't know if the factories could keep up with the demand.

[BroadyFord]

It would be funny if Devereux announced an end to Holden manufacturing effective immediately due to this and the government said his announcement "came as a total shock without so much as a phone call or a word of consultation".

An eye for an eye!

[Bulletime]

Kicking myself I didn't lease my car for 5 years instead of 3, I was going to release my car for a further 3 in feb so not one of the churn to constant new cars ppl but anyway.

So what happens if the lease company goes under and my lease is managed by them in the mean time?

I think it was said pretty well that this isn't ppl trying to rort the tax system its predominately regular everyday ppl and families who do a bit of driving and just accessing something that is available to them. Now overnight it's gone and ppls budgets will be affected, would have to work at a lease company tho. Overnight they have no industry.

Fun times...

[Brazen]

Originally Posted by Bulletime

So what happens if the lease company goes under and my lease is managed by them in the mean time?
.

Novated leases are very lucrative, high interest rates, high fees, finance secured against a vehicle and usually the leasee is in secure employment. Plus they probably get kickbacks from the petrol companies, tyre companies and car manufacturers. If they went under because they weren't getting any business, someone like Macquarie and CBA would buy them out and keep the leases running and make good money off it.

[Bulletime]

Except all the leases will cease...

When I signed up I compared the interest rate to personal loans and it was about 3% better, so my experience has been that the interest rate is more competitive. Not as good as a home loan but that's not an option for everyone.

Fees are negligible, my work has a negotiated fee of 180 a year, which is bugger all. I sourced my car myself second hand so no commissions for peddling a new car either.

But yes on the whole I'm sure it would be reasonably lucrative, it is a viable industry, well was.

[GTP534]

Just wondering if this was a unilateral decision by Rudd? Seems like there's been very little consultation inside cabinet or with the ministries overseeing the affected industries.

[jpd80]

As said previously by someone with accounting knowledge, this crack down will only hurt tradies and middle wage
income earners, people on high range salaries are too smart with accounting to fall into these new bear traps.

I propose for the elimination of all state and federal taxes and excises, replace everything with a 25% GST on every transaction.
A cheaper simpler form of unavoidable tax which could be supplemented by a mild Business tax of say 20-25%
that makes obfuscation of spending unnecessary.

[Brazen]

Originally Posted by jpd80

As said previously by someone with accounting knowledge, this crack down will only hurt tradies and middle wage
income earners, people on high range salaries are too smart with accounting to fall into these new bear traps.

I propose for the elimination of all state and federal taxes and excises, replace everything with a 25% GST on every transaction.
A cheaper simpler form of unavoidable tax which could be supplemented by a mild Business tax of say 20-25%
that makes obfuscation of spending unnecessary.

But then poorer people end up carrying a larger tax burden as they spend more as a proportion of income.

[jpd80]

Originally Posted by Brazen

But then poorer people end up carrying a larger tax burden as they spend more as a proportion of income.

Compensation as low income earners, I know there would be anomalies but the plan
was discussed a while back and is actually based on the daffy French system..

Think about the system a bit more and you'll see how much it would bite people on high disposable income spending up big on lifestyle..
and then compare with the poor who don't have so much income, maybe already on welfare, so sponsored by the government.
Works for the socalists.

[gtfpv]

Originally Posted by Dr Smith

I'm going to be tough here and say if it's a work vehicle used fully for work faiir enough, if it's a vehicle bought and your minimising your taxable income pretending it has work duties when it doesn't bad luck. If running a log book for 12 weeks to save you thousands is too much work then bad luck. I'd say there is more rorting then understood and if it is worth it do the extra paperwork. And before anyone asks I have work vehicles and private ones, if I was audited on them I don't have anything to fear, then again I'm in manufacturing and we are a dying breed.

i dont get the bs , about only business owners have cars for work . your kidding right , guess who drives to work everyday and back . this may not be earning $$$$$ BUT F ME ITS DEFINATELY WORK RELATED EXPENSES TO THE PEOPLE DRIVING TO WORK . pommy pompas a s s mentalities !!!! really .
not that it matters . the govt has scrapped it . car manufacturers are closing down , jobs will disappear cars will get older and stay on the road longer . but people so called earning money driving utes to the hardware instead of on the way to thier work will be special people worthy of taxc deductions right , and everyone else driving to work wont be rorting the system . i have another sign to put on my punching bean bag called; ""business owner with work ute""" .

[gtfpv]

Originally Posted by jpd80

As said previously by someone with accounting knowledge, this crack down will only hurt tradies and middle wage
income earners, people on high range salaries are too smart with accounting to fall into these new bear traps.

I propose for the elimination of all state and federal taxes and excises, replace everything with a 25% GST on every transaction.
A cheaper simpler form of unavoidable tax which could be supplemented by a mild Business tax of say 20-25%
that makes obfuscation of spending unnecessary.

and that works very well for socialists thanks

[Dr Smith]

Originally Posted by gtfpv

i dont get the bs , about only business owners have cars for work . your kidding right , guess who drives to work everyday and back . this may not be earning $$$$$ BUT F ME ITS DEFINATELY WORK RELATED EXPENSES TO THE PEOPLE DRIVING TO WORK . pommy pompas a s s mentalities !!!! really .
not that it matters . the govt has scrapped it . car manufacturers are closing down , jobs will disappear cars will get older and stay on the road longer . but people so called earning money driving utes to the hardware instead of on the way to thier work will be special people worthy of taxc deductions right , and everyone else driving to work wont be rorting the system . i have another sign to put on my punching bean bag called; ""business owner with work ute""" .

Who said anything about only business owners having cars for work? All I said was if it's legit and worth it fill in a log book. I suspect a lot of the rorting is actually by business owners claiming their wife's car for example. You might need a new one tonner to take that big chip off your shoulder.

[Cuyper]

The average Joe has to drive his own car to work, everyone else can more than afford to pay more to the government some more coins so it's not worth worrying about

[KIWI-1]

Originally Posted by Brazen

Novated leases are very lucrative, high interest rates, high fees, finance secured against a vehicle and usually the leasee is in secure employment. Plus they probably get kickbacks from the petrol companies, tyre companies and car manufacturers.

Spot on. We told we could not buy from the local dealer, brand X fuel, brand X tyres based on km driven not wear. We ended up changing them when half worn because we had already paid for them in the lease. It was also a requirement that the tyre dealer "returned" the tyres to the lease company.

As for the guy talking of offloading 100 staff by tomorrow... has he found someone to blame for other business problems?

[MickyB]

This will not affect tradies, as long as they drive utes on the FBT exempt list and limit their use to:

* travel between home and work
* travel that is incidental to travel in the course of duties of employment
* non-work related use that is minor, infrequent and irregular (for example, occasional use of the vehicle to remove domestic rubbish).

The above is taken directly from the ATO website.

As Dr Smith has said, it will effectively end the practice of packaging up a vehicle for a non-working spouse - which really is a rort in the first place.
It will also stop middle and high income earners from packaging a vehicle that has limited business use and having other taxpayers subsidise that privilege. The difference is that high income earners will probably be able to afford the extra FBT contributions.

[davocol]

It was a matter of time really, it was a loophole I could not never understand. Next target Landlords.

[vanman_75]

Originally Posted by davocol

It was a matter of time really, it was a loophole I could not never understand. Next target Landlords.

Landlords again get kick backs because they add housing to the masses, that would otherwise would have to be built by everyones tax dollars , I can tell you that if that goes then you will see the building industry cop a kick in the nuts too , are all you economists sure you know how this will affect everyone ? Fact car sales will take a beating ...along with many many jobs , by all means target the rorters but this is not the fix for that

[PepeLePew]

The 'loophole' likely suited, how longs it been around? Can anyone even remember when the 'loophole' was created? It suited when we needed to get locally manufactured vehicles moving off the showroom floors when local vehicles dominated the sales charts. Now we've decided the industry doesn't matter anymore, the 'loophole' can go. (please note the sarcasm that was soaked in)

Scrap the mandatory bicycle helmet. Watch sales of bicycles blow out as people remember what it's like to ride with the wind in your hair and not look like a stooge (apologies to the cyclists out there). Watch the flow on effects of healthier happier adults and the uptake of riding by children again. A lot of that was tongue in cheek but with a real element of truth, point being, the public would just hear 'helmets protect our children from head injuries as proven by this outdated study'. Just as all we hear about are the rorts with the FBT discussion. It isn't a rort for the majority, its part of our tax system, and the majority likely being middle income earners (there is as much substance to that statement as anything the government has released) will suffer from this change theoretically to stem the minority, but in general its just to pull tax revenue back into the governments coffers in the shorter term to band aid a fix, to win points with lower income earners that don't take advantage of it, and what was perceived as a 'easy target'. Be interesting to see where this ends up.

[BroadyFord]

Getting worse...

EXCLUSIVE: FBT halts 8500 car orders


http://www.carsguide.com.au/news-and...500_car_orders

3000 jobs at risk as fringe benefits tax change bites.
The Fringe Benefits Tax farce is set to backfire on the Rudd Government as industry bodies reveal the number of suspended new-car orders have grown to 8500 -- about one-third of all deliveries in a week -- and up to 3000 jobs will be axed.

The Australian Salary Packaging Industry Association, which represents 1.25 million company-car drivers, also says the Rudd Government made the sweeping changes based on inaccurate data.

“The use of misinformation is of great concern. The FBT records and the income tax records are not linked so we don’t know how Treasury came up with the data,” said Leigh Penberthy, president of ASPIA and a 35-year veteran of the car leasing and fleet industries.

“It explains why the Government has made so many incorrect assumptions. Contrary to their line about this affecting drivers of expensive cars, it’s actually hitting average wage earners hardest because they are the majority of those affected.”

Yesterday the Deputy Prime Minister Anthony Albanese dismissed the potential impact on Australian car manufacturing, telling ABC Radio: “The chances are it’s not a Holden Commodore [driver rorting the old FBT system] it’s a BMW [driver]”.

BMW spokeswoman Lenore Fletcher said: “The comments about BMW drivers are offensive and untrue. Most lease drivers are not in expensive cars.” ASPIA figures show 75 per cent of company-car drivers earn “significantly less” than $100,000 and drive vehicles worth less than $40,000.

“If the Government had come to the industry association to get those records we could have told them. Instead, these changes are going to affect average householders,” said Penberthy. The industry body also been advised by four of the top 10 leasing firms that they will start to lay off workers by the end of this week.

“We’re going to start losing jobs very quickly in a very short space of time,” said Penberthy. “In the last 36 hours we’ve been told by our members to expect massive job losses.” Yesterday, one of Australia’s leading salary package firms Selectus said it would lay off 100 workers by the end of this week unless the FBT changes were reversed.

Even the National Tax and Accountants Association came out against the FBT changes -- even though the new rules will lead to more business for its 8000 members. “It will bring the client back to the accountant but, contrary to perception, there is no celebration on our part,” said Andrew Gardiner, spokesman for the NTAA.

“This is bad policy. Our members are concerned about the wider impact on jobs and the community. This decision doesn’t only affect manufacturers but the entire automotive retail sector.” On Tuesday the Rudd Government announced it would require company-car drivers to fill-out log books rather than claim a blanket 80 per cent of their vehicle use is for work.

The rules came into effect immediately but the car industry warned it would slow new-car sales and cripple the local manufacturing industry. Up to 80 per cent of locally made cars are bought by fleets or salary-packaged drivers.

The changes are also not likely to deliver the forecasted $1.8 billion in revenue because the industry expects drivers will switch to cheaper and/or used cars to avoid the FBT, which adds between $1400 and $4000 to the car's running costs each year, depending on the model.

[MAD]

Maybe this will reduce the throw-away society we have become.
All in all, not a bad thing.

[BroadyFord]

.....

McMillan Shakespeare suspends trading

http://www.goauto.com.au/mellor/mell...257BAC00045F76

18 July 2013
By MIKE COSTELLO
MCMILLAN Shakespeare was today granted a week-long suspension from the Australian Stock Exchange pending an announcement on the future direction of the car salary-sacrificing specialists.

The suspension effectively extends the ASX-approved 48-hour trading halt granted to the company on July 16, given shortly after an announcement from the federal government proposing changes to the way work vehicles are taxed.

Following the government’s announcement, the publicly listed salary packaging specialist saw the value of its shares plummet almost 15 per cent.

ASX manager of listings compliance James Gerraty granted the company’s request to extend the trading suspension until July 25, giving it more time to “evaluate the potential impact of the government’s proposed changes”.

McMillan Shakespeare chief financial officer and company secretary, Mark Blackburn, says the company expects to make an announcement regarding where it will go next before the commencement of trading one week from today.

The ALP’s proposed sweeping changes to the tax system on work cars were tabled in order to recoup about half of the estimated $3.8b in budget losses stemming from a shift from a fixed carbon tax to a floating emissions trading scheme.

The changes would see the statutory formula of claiming fringe benefits tax on cars abolished immediately, and back-dated from the time of its introduction. The statutory formula entitles employees with work-provided cars to an assumed deduction of 80 per cent, with no need to keep a log.

These reforms could affect up to a third of the new-car market – about 363,000 vehicles – according to the Federal Chamber of Automotive Industries (FCAI), many of which would be fleet-favoured Australian-made vehicles.

The proposed changes have drawn the ire of local car-makers and full importers alike, as well as novated car lease and salary-packaging providers, and industry advocates. Many affected groups have cited a lack of consultation from government.

“As previously noted, the changes if implemented will have a material impact on the company’s business,” said Mr Blackburn.

“While the changes will require the passing of legislation to become effective, the government’s announcement will still have a short term impact on the company until there is certainty regarding whether the changes will be implemented.

This is because the effective date of the government’s announcement was July 16, and it very significantly impacts the company’s ability to originate novated leases.”

The federal opposition proposes a complete removal of any carbon price, meaning it would be faced with a budget shortfall in excess of the ALP’s $3.8 billion. Therefore, any proposed aimed at recouping some of this would logically be a strong chance at passing both houses, irrespective of which party wins the election.

Credit Suisse is reportedly ascribing a "high probability" that these changes are here to stay.