There have been changes to the fringe benefit treatment of cars to remove the unintended incentive for people to drive their vehicle further than necessary in order to obtain a larger tax concession.

Under the ‘statutory formula’ method, a person’s car fringe benefit is determined by multiplying the relevant statutory rate by the cost of the car. Currently, the sliding scale of rates provides an increased tax concession for salary-sacrificed or employer-provided vehicles that are driven further.

The Government will replace the current rates with a single fl at rate of 20 per cent that applies regardless of the distance travelled. The reform will only apply to new vehicle contracts entered into after 7:30pm (AEST) on 10 May 2011, and will be phased in over four years as shown:

Distance travelled during the FBT year
(1 April – 31 March)

Statutory rate (multiplied by the cost of the car to determine a person’s car fringe benefit)

Existing contracts

New contracts entered into after 7:30pm (AEST) on 10 May 2011

From 10 May 2011

From 1 April 2012

From 1 April 2013

From 1 April 2014

0 – 15,000 km

0.26

0.20

0.20

0.20

0.20

15,000 – 25,000 km

0.20

0.20

0.20

0.20

0.20

25,000 – 40,000 km

0.11

0.14

0.17

0.20

0.20

More than 40,000 km

0.07

0.10

0.13

0.17

0.20

•   Compared to the current statutory rates, a single rate of 20 per cent will: increase the tax concession provided for vehicles driven less than 15,000 kilometres a year;
•   maintain the current tax concession provided for vehicles driven between 15,000 and 25,000 kilometres a year; and
•   decrease the tax concession provided for vehicles driven more than 25,000 kilometres a year.

People who use their vehicle for a significant amount of work-related travel will still be able to use the ‘operating cost’ (or ‘log book’) method to ensure their car fringe benefit excludes any business use of the vehicle.

For more information with regards to the car fringe benefit reforms or for any other business tax advice submit an online enquiry or call our experienced team of accountants on 1300 QUINNS (784 667) to book an appointment.

Enquire today and we will get back to you next business day.