staringclown

Axing salary sacrifice on vehicles the thin end of the wedge?

84 posts in this topic

The government needs money for the early introduction of an ETS. An interesting lead on the ABC Business program claims that the axing of salary sacrifice on vehicles is a heads up to other industries that suckle on the public teat of subsidies. NG was specifically mentioned. As was super deductions. A commentator warned businesses whose models relied on subsidy to diversify. Lot's of bleating from the car dealers.

I wonder if this signals a change? The APS cuts will likely continue but are small beans when compared with 5-6 billion NG. Super cuts would yield far more. Interesting times.

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The government needs money for the early introduction of an ETS. An interesting lead on the ABC Business program claims that the axing of salary sacrifice on vehicles is a heads up to other industries that suckle on the public teat of subsidies. NG was specifically mentioned. As was super deductions. A commentator warned businesses whose models relied on subsidy to diversify. Lot's of bleating from the car dealers.

I wonder if this signals a change? The APS cuts will likely continue but are small beans when compared with 5-6 billion NG. Super cuts would yield far more. Interesting times.

Just watched the programme.

Negative Gearing was mentioned along with Medical Insurance Rebates, Diesel Excise, and subsidies to the Film & TV Industries, to name just a few others.

These would be interesting changes if they were implemented and would probably end up back-firing on the current government at the election.

The coalition must be rubbing their hands with glee, at the prospect that they will come into office and allow the changes to remain, without the hangover of being the ones that actually changed them.

Austerity by any other name is still....

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Just watched the programme.

Negative Gearing was mentioned along with Medical Insurance Rebates, Diesel Excise, and subsidies to the Film & TV Industries, to name just a few others.

These would be interesting changes if they were implemented and would probably end up back-firing on the current government at the election.

The coalition must be rubbing their hands with glee, at the prospect that they will come into office and allow the changes to remain, without the hangover of being the ones that actually changed them.

Austerity by any other name is still....

They requested a tax review from Henry but they refuse to implement the recommendations. No-one is willing to bit the bullet!

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The ALP leadership are like a Kaper Kops SWAT team. Invariably as they squeeze off a burst with their MP5s they fail to notice the red dot is firmly established on the top of their foot. Sad really as I was hoping Dudd would get enough traction that I could vote for a Turnbull ticket.

If 1/3 of new vehicle sales are leased, the job losses are going to be immense.

http://www.heraldsun.com.au/news/special-features/fringe-benefits-tax-changes-to-backfire-on-prime-minister-kevin-rudd/story-fnho52jj-1226681232138

According to Albanese and other Dudds the tax changes target the wealthy leasing "BMWs". Really? How out of touch can you be?

Not one luxury car in the top 10...

http://ceoblog.smartsalary.com.au/2012/09/12/the-top-10-cars-sourced-by-smartsalary/

This is just incompetence. This is policy on the run like the pink batts. Apparently treasury told them that most leases are on 6 figures and luxury cars - my 2nd link above shows the stats.

I'm going for 20,000+ Automotive job losses before the dust settles and before Toyota and Holden shut the plants.

A third of new deliveries 'suspended' :shocking:. Australia sells a million cars a year, do the maths.

Utter incompetence.

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The ALP leadership are like a Kaper Kops SWAT team. Invariably as they squeeze off a burst with their MP5s they fail to notice the red dot is firmly established on the top of their foot. Sad really as I was hoping Dudd would get enough traction that I could vote for a Turnbull ticket.

If 1/3 of new vehicle sales are leased, the job losses are going to be immense.

http://www.heraldsun.com.au/news/special-features/fringe-benefits-tax-changes-to-backfire-on-prime-minister-kevin-rudd/story-fnho52jj-1226681232138

According to Albanese and other Dudds the tax changes target the wealthy leasing "BMWs". Really? How out of touch can you be?

Not one luxury car in the top 10...

http://ceoblog.smartsalary.com.au/2012/09/12/the-top-10-cars-sourced-by-smartsalary/

This is just incompetence. This is policy on the run like the pink batts. Apparently treasury told them that most leases are on 6 figures and luxury cars - my 2nd link above shows the stats.

I'm going for 20,000+ Automotive job losses before the dust settles and before Toyota and Holden shut the plants.

A third of new deliveries 'suspended' :shocking:/>. Australia sells a million cars a year, do the maths.

Utter incompetence.

Would you be as upset over the job losses in the property industry if the government decided to axe NG Bernie?

We would be hearing the same arguments from construction, real estate and other property lobby groups presumably.

The same thing happened when FBT was cut for corporate lunches. Restaurants were going to go broke. They didn't.

As a general principle I'm happy not to subsidise others new car and petrol costs.

Some industries have higher salary sacrifice levels than others. The public sector in particular. So the tax breaks are not particularly fair.

Business can still access the scheme.

I'm not convinced that the subsidies to the automotive industry have encouraged the production of better quality vehicles or vehicles that people want to buy. In spite of the subsidies there has been no guarantee that redundancies would not occur. Ford packed it in before this change and Holden is cutting anyway. What do we actually get for our dollar? Subsidies to unsustainable industries stifle innovation.

Liberal policy is to cut subsidies and IMHO it is a good policy. I agree that this FBT change is likely policy on the run from Labor but cutting subsidies to inefficient industry is undoubtedly good policy IMO. If they extend it to NG all the better.

On recent form there is a more than an even chance that the policy will be reversed anyway as a strong vested interest campaign gets into full swing. A la MRRT. But they should stand firm.

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I agree that this FBT change is likely policy on the run from Labor but cutting subsidies to inefficient industry is undoubtedly good policy IMO.

The car manufacturing industry is Camry, Commodore and Cruze. Nothing to do with 'inefficiency' or industry proection. Of course its policy on the run, Albo was talking about fatcats with BMWs when the bulk of the industry is cheaper cars.

You want to target inefficient industry, target middle class welfare and slash it in general to put it back as a safety net for the needy until they can get back on their feet.

Some glove puppet on the ABC the other day was whining that uni students lived below the poverty line. Really? No way! Serious? :rolleyes:

But they should stand firm.

They should stand firmly on the deck of a leaking boat 500 miles south of Tassie. :punk:

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Would you be as upset over the job losses in the property industry if the government decided to axe NG Bernie?

The Dudds have a $12M property potfolion haven't they? He'll sell his organs first.

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The car manufacturing industry is Camry, Commodore and Cruze. Nothing to do with 'inefficiency' or industry proection. Of course its policy on the run, Albo was talking about fatcats with BMWs when the bulk of the industry is cheaper cars.

You want to target inefficient industry, target middle class welfare and slash it in general to put it back as a safety net for the needy until they can get back on their feet.

Some glove puppet on the ABC the other day was whining that uni students lived below the poverty line. Really? No way! Serious? :rolleyes:/>/>

They should stand firmly on the deck of a leaking boat 500 miles south of Tassie. :punk:/>/>

Arguably, the automatic FBT concessions using the statutory method are middle class welfare. John Button introduced the scheme to support the local car industry in '86. If you start a business based on a tax dodge you need to be prepared for when that tax dodge ends.

Quick Info:

Car FBT tax applies to cars which are either an employer provided car used for for work and personal use OR a salary sacrificed car which is privately owned.

To work out the benefit you could claim you can use one of two methods, either the operating cost method (using a log book) or the statutory formula method.

The operating cost method is when you multiply the cost of running the car by the percentage of personal use of the car.

The statutory method is simpler, you just multiply the capital cost of the car by 20% to work out the total benefit you can claim.

Changes Kevin Rudd Wants To Make

Scrapping the statutory method.

This means that businesses will have to use the log book method, and will only be able to claim a benefit for the actual amount of the cars usage. Increasing the time it will take to calculate these figures, therefore increasing admin costs for businesses.

Will it affect your agreement?

The changes will come into effect from April 1st, 2014. But will apply to all new contracts entered into from July 16 2013. It will not apply to agreements that were entered into before July 16 2013

So you have to keep log books to support your business usage of the vehicle. The same as every other FBT exemption. It was a rort that has been tightened.

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John Button introduced the scheme to support the local car industry in '86.

Really? Review the history of FBT. Prior to 86 there was NO FBT on anything. It didn't exist.

Impact?

http://www.theaustralian.com.au/executive-living/car-industry-details-losses-from-fbt-plan/story-fngmee2f-1226683418586

410833-130723-n-fbt-cars.jpg

It was born as just another ALP cash grab.

FBT revenue in Millions

512px-ABS-5206.0-AustralianNationalAccounts-NationalIncomeExpenditureProduct-TaxesCurrentPrices-TaxesOnIncome_Individuals_FringeBenefitTaxes-A2302194F.svg.png

A drop in the ocean compared to the welfare outgoings (note where health and education sits)

38%20Appendix%20G%20Australian%20Government%20taxation%20and%20spending_2.jpg

Where does the welfare cash go? Landlords pockets mostly.

Screwing automotive industry is fine but NEVER screw the landlords out of their govt bucks.

If real estate rents were 50% cheaper and houses 50% cheaper to buy would you need Family Tax benefit A or Schoolkids bonus or Rental Assistance?

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If real estate rents were 50% cheaper and houses 50% cheaper to buy would you need Family Tax benefit A or Schoolkids bonus or Rental Assistance?

The joys of government subsidies - they creates bigger market distortions, requiring more subsidies that create minimal benefits to the intended recipients!

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How many salary sacrificed cars on a novated lease have no business usage? Apart from the tax forgone through SS, how about the GST lost?

Won't someone think of the children?

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Really? Review the history of FBT. Prior to 86 there was NO FBT on anything. It didn't exist.

Impact?

http://www.theaustralian.com.au/executive-living/car-industry-details-losses-from-fbt-plan/story-fngmee2f-1226683418586

410833-130723-n-fbt-cars.jpg

It was born as just another ALP cash grab.

FBT revenue in Millions

512px-ABS-5206.0-AustralianNationalAccounts-NationalIncomeExpenditureProduct-TaxesCurrentPrices-TaxesOnIncome_Individuals_FringeBenefitTaxes-A2302194F.svg.png

A drop in the ocean compared to the welfare outgoings (note where health and education sits)

38%20Appendix%20G%20Australian%20Government%20taxation%20and%20spending_2.jpg

Where does the welfare cash go? Landlords pockets mostly.

Screwing automotive industry is fine but NEVER screw the landlords out of their govt bucks.

If real estate rents were 50% cheaper and houses 50% cheaper to buy would you need Family Tax benefit A or Schoolkids bonus or Rental Assistance?

Yep, the Button plan aimed to make the automotive industry more competitive by reducing tariffs on imported vehicles.

From the AFR:

Griffith University tax lecturer Anna Mortimore said the concession was introduced as part of the Button plan of former Labor industry minister John Button to move the car manufacturing industry to lower protection, as a trade-off of sorts for the cut to tariffs then.

Crikey FBT coverage is nothing but self-interested hysteria

The government wants to trim FBT — and interest groups are up in arms about it. Accountant and former economist John Lawrence explains why you should think twice before believing the hysteria.

Hysteria from interest groups whenever governments announce plans to trim handouts usually indicates an absence of suitable contra arguments. Government plans to change the fringe benefits tax treatment of motor vehicles is a case in point.

How dare the government contemplate reducing allowable claims for motor vehicles’ expenses to amounts actually incurred in earning assessable income?

Before the introduction of FBT, non-cash employee benefits were caught by Section 26(e) of the 1936 Tax Act. However, the two-line sub-section was more honoured in the breach than the observance, and a whole new act, the FBT Assessment Act, replaced it.

Rather than pay FBT on a log-book-determined amount of private use and hence confine motor vehicle claims to amounts actually incurred in earning assessable income, an employer can elect to apply the statutory formula, a percentage dependent on annual mileage, to the cost of the car in order to calculate the amount of fringe benefit.

Following the Henry Tax Review, the statutory formula of 20% was adopted regardless of distances travelled. A $50,000 car now results in an annual fringe benefit of 20% or $10,000, which attracts FBT of $9,600. The value of a benefit is the deemed net value to the employee and is the first step in calculating FBT. Grossing up the benefit and then applying the FBT rate of 46.5% results in FBT of $9,600. The employer claims a deduction for all vehicle costs plus the FBT paid and reduces the employee’s salary accordingly as part of a salary package. The employee receives a reduced salary but not before effectively getting a tax deduction for otherwise private expenses, offset in part by the FBT paid.

If business use is low and one’s marginal tax rate is not too low, it’s worth salary packaging in the manner described. The higher the tax rate and the amount of private use, the greater the tax savings. The median level of tax savings generated by a salary sacrificed car is believed to be about $3000 per annum.

The statutory formula has also been interpreted by some to be a de facto way of subsidising the local car manufacturing industry. There is no evidence the formula was intended for that, nor has it led to more sales of domestically produced cars rather than imported models. Let’s be frank: it increases debt-fuelled private consumption. Why governments should encourage such behaviour is not explained. It’s sometimes said state governments benefit from extra duties, but that simply makes it a type of Ponzi scheme similar to the first-home buyer’s grant.

The statutory formula was intended to make it administratively simpler, but as always, as soon as an arbitrage advantage beckons, a willing army of rent-seekers appear to exploit the situation, in this case via novated leases whereby an employee’s car lease obligations are assumed by the employer along with other vehicle running costs as part of salary sacrifice.

Overlooked in the discussion are small mum-and-dad private companies, which also use the statutory formula although they are not as concerned with salary packaging per se. Using cash, finance leases or loans they simply purchase vehicles for principals and associates. In most cases there’s no limit to the number of vehicles acquired provided they’re used by associates. It would be surprising if there weren’t a few Beemers in the student car park at Geelong Grammar receiving tax subsidies. It’s difficult to pinpoint the arguments for maintaining such inequities.

The need for log books affirming business use will curtail this latter behaviour, especially if is mandated that cars attributed to the same employee keep concurrent log books.

The simple fact is a minority of taxpayers receive an advantage. The Henry Tax Review put forward eminently reasonable principles in recommendations eight and nine that “all forms of wages and salary for Australian resident taxpayers should be taxable on an equivalent basis and without exception” and “fringe benefits that are readily valued and attributable to individual employees should be taxed in the hands of employees through the PAYG system”. To date no one has argued with those principles, least of all Opposition Leader Tony Abbott. Misunderstanding and self-interested hysteria have again replaced reason in the public policy debate.

So it's inequitable and it is a rort. Legitimate business use still gets the exemption.

I agree there are a lot of other middle class welfare measures that should also get the arse. That's why I hoped as per the OP that it was the thin end of the wedge.

You wouldn't happen to be benefitting from a salary sacrifice package TP? :)

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Introduction of FBT and introduction of CGT passed with little more than a whimper (maybe i'm too young or was asleep). A small change to FBT rules and there's great gnashing of teeth.

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You wouldn't happen to be benefitting from a salary sacrifice package TP? :)style="font-size: 9pt;">

There's no way of avoiding the change if the car is 100% (or close to) private use.

If the car does some business miles then with a little trickery (not suggesting falsifying log books, wink) it won't be a big deal.

Rather than an assumed 20%, it's likely1to revert to how it was, where you substantiate business/private usage by a log book. A logbook was required to show business/private split and had to be kept for x number of weeks (12?) and could be extrapolated over x (4?) number of years. Maximising business usage and minimising private usage during the period could well show a private rate less than 20%.

eg - You pick a 12 week period where you do a lot of business miles and little personal miles (don't use the car much on purpose for personal use). Bingo, you've got a low personal use that's good for four years!

1 - I've seen some articles that say that this how it will operate.

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The joys of government subsidies - they creates bigger market distortions, requiring more subsidies that create minimal benefits to the intended recipients!

Amen :thumbsup:/>

AWU and Welfare Lobby Groups:

FAIL-snake-eating-own-tail.jpg

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You wouldn't happen to be benefitting from a salary sacrifice package TP? :)

Nice try :phone1: . A tad weak but 4 pts for effort.

These changes will be of zero effect to me personally, further I drive a German car and the Mrs a French one, nothing Australian made. This is just sh*t politics. Its just reactive and the tip of the iceberg as far as I'm concerned simply because it smells like the Pink Batts.

Heaven forbid I find myself in agreement with the Mad Monk

FBT move won't raise claimed revenue

Back of beer coaster estimated losses.

200,000 x $30,000 cars not selling = $900M loss of GST

20,000 workers onto NewsStart dole = $260M in new welfare payments

20,000 @ $50K not paying incometax = $160M in loss of PAYG tax revenue

200,000 cars not manufactured in Australia and the total collapse of the industry and its hit on GDP = Priceless :thumbsup:

http://www.fcai.com.au/sales/monthly-production-volumes

Dudd is just a tool.

Hey StaringC why not go after charities and hospitals run by NFPs as well... :naughty:https://www.epacsalarysolutions.com/public/WhatCanYouSalaryPackage.aspx

You wouldn't happen to be benefitting from a salary sacrifice package TP? :)

You wouldn't be one of 160,000 non uniformed federal public servants suckling six figures on the govt tit would you? :laugh::P

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Nice try :phone1: . A tad weak but 4 pts for effort.

These changes will be of zero effect to me personally, further I drive a German car and the Mrs a French one, nothing Australian made. This is just sh*t politics. Its just reactive and the tip of the iceberg as far as I'm concerned simply because it smells like the Pink Batts.

Fair enough. We'll have to agree to disagree on this one TP.

You wouldn't be one of 160,000 non uniformed federal public servants suckling six figures on the govt tit would you? :laugh::P

Nope. There is two of us. Ms clown is also suckling. :D

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Notice the sudden arrival of Opel cars of all sizes in Australia. Now why would GM be doing that? rolleyes.gifschmoll.gifnerd.gif

I have a 98 Holden Vectra. Built in Germany and badged as Opel there.

How many other 'Holden' vehicles over the years were actually Opels?

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I have a 98 Holden Vectra. Built in Germany and badged as Opel there.

How many other 'Holden' vehicles over the years were actually Opels?

The original Astra was based on an Opel. Some of the early Commodore designs seemed to have been 'inspired' from Opel designs as well.

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I have a 98 Holden Vectra. Built in Germany and badged as Opel there.

How many other 'Holden' vehicles over the years were actually Opels?

Indeed but they were rebadged. Now GM Opel is getting the brand traction here as Opel. A "Wheels Car of the Year" and super cheap finance and media exposure is next. Then they shut down Holden.

The cars

http://www.opel-australia.com.au/vehicles/cars.html

Goodbye Commodore (say 2016)

http://www.opel-australia.com.au/vehicles/opel-range/cars/insignia-sedan/index.html

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Back of beer coaster estimated losses.

200,000 x $30,000 cars not selling = $900M loss of GST

I presume the 200k figure is the number of Australian built cars?

If so, do you really think this FBT change is going to result in no one buying Australian made cars?

Or is it 200k cars are leased (a year?)?

Will no one/company lease a car under the changes?

Either way companies never paid GST on cars they purchased/leased (ok, they paid it but claimed it as a GST input). There is no GST lost through the changes, it was never paid.

You're calculation also seems to be 50% wrong.

20,000 workers onto NewsStart dole = $260M in new welfare payments

Is that the Australian car manufacturing workforce? Once again will no one/company buy a new car under the changes?

20,000 @ $50K not paying incometax = $160M in loss of PAYG tax revenue

See above.

Hey StaringC why not go after charities and hospitals run by NFPs as well... :naughty:style="font-size: 9pt;"> https://www.epacsala...aryPackage.aspx

That's a totally separate, complex and emotive discussion.

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