The Prime Minister and Treasurer announced on 16 July 2013 their plans to abolish the statutory method of accounting for the value of motor vehicles for Fringe Benefits purposes. This is part of the way the government intends to fund the emissions trading scheme.
Treasurer Chris Bowen said â€œWe’re abolishing the statutory formula in relation to fringe benefits tax on cars..This will save $1.8 billion over the forward estimates.
Now the current statutory formula allows people who are claiming fringe benefits tax relief to just nominate a figure of 20 per cent and not justify that claim.
The world has moved on from when this system was introduced in 1986.
We now have much better technology, so that people can use phone apps and other devices which are much easier than keeping a log book.
The rules stipulate that it’s necessary to keep a log book for up to 12 weeks over a 5 year period but this can now be done through mobile phone technology and applications which are easily downloadable on the web.
This means that people can claim this if they are entitled to it very easily and there is no longer any justification for the statutory percentage method of claiming fringe benefits tax use on cars.
(This change) does affect potentially around 320,000 people who are expected no longer to be able to justify that percentage claim.
This will be effective for all contracts entered into from this time forward (16 July 2013 onward) but there will be a transition in place until April 2014 to ensure people have time to make the transition and to factor that into their calculations.
It does not affect people who are already have a contract in place, it is only contracts entered into from this time forward.â€
Summary of changes;
- Fringe benefits tax applies to employer-provided car used for work and personal use, or a privately-owned, salary sacrificed car.
- The benefit is currently calculated using operating cost method (log book) or statutory formula method.
- Operating cost method: cost of running car multiplied by proportion of personal use of car (recorded in log book).
- Statutory formula method: cost of car multiplied by 20 per cent currently subject to transition rules), regardless of actual personal use of car. This method automatically assumes a significant proportion of use of the car is for business purposes.
- The removal of statutory formula method will apply to contracts entered into after July 16, 2013. It will be effective from April 1, 2014.