Changes to FBT rules on cars (novated leases etc)

[woofy]

I don't have much problem with this, and I have a company funded car. If you novate a car and then leave it at home and catch public transport, it begs the question why you needed it. After doing that for a few years I sold my car.

The idea behind Novated leasing was for people travelling for work related reasons to have some benefit their employer provided to compensate them. Due to our tax rates formerly being so high, it worked out for people in the higher brackets to get cheaper cars, ie the more senior people, and they allowed it. After the tax rate brackets were moved, less and less people got such a big advantage and the people doing the kms were which is how it should be. This just put it back where it should be again.

It's the same as them removing the laptop for work deal last budget. As much as I liked it, if you didn't need one for work, there was no reason the govt should be paying for your discounted laptop.

[Dyldo]

Guys i work for a financial services firm, and our Tech guys have produced a auto-calc for this stuff. Happy to help via PM if anyone is super curious.

Bottom line though, start considering just loan & claim back type deals, rather than novates. The gap is close now.

[zbeasty]

"most of the bosses live close to their workplace"

Really? Source?

Back in 1986 when this legislation was enacted most bosses did live close to their workplace. It was as Gareth said aimed mainly at the big bosses who lived on the lower north shore in Sydney and drove their Ferrari/Porsche/Rolls/S Class over the bridge to the CBD every day. Bracket creep and tax rate changes have meant that the original rules no longer work hence the changes.

If you are going to buy a new car anyway it generally makes sense to package it especially if you use the employee contribution method. The more you earn the more tax effective it is.

[NickZ]

It's the same as them removing the laptop for work deal last budget. As much as I liked it, if you didn't need one for work, there was no reason the govt should be paying for your discounted laptop.

This was a crazy loophole - if you could justify 100% business use of your laptop, it was basically free if on the top tax bracket, as you got the 10% GST back, no FBT on the laptop (saves 45% tax) and then claim the laptop as a tax deduction (another 45% tax saving).

Even on average incomes you got 60% of the cost back.
Back to the topic, I am personally happy about this change as both me and the wife do less than 15000km a year on our cars and I do want to novate lease the next car, so I will be better off. I do feel for people who travel a lot of kms just to get to work (i.e. from the burbs to the city) as this may (depending on circumstances) impact them substantially.

[Eaglehawk]

Any word on what happens if you WANT to move to the new scheme for contracts that were signed (just) before May 10th?

I elected to only do 10,000km, so I pay 26%, but I would like to move to 20% of course

[brad]

Only your lease company can advise you of that. They may be willing to cancel a lease & let you start anew for a small fee.

[Frankenstrat]

It was as Gareth said aimed mainly at the big bosses who lived on the lower north shore in Sydney and drove their Ferrari/Porsche/Rolls/S Class over the bridge to the CBD every day.

So the ATO assumed that there were no big bosses living outside of Sydney? Hmm, interesting premise, that one.

[brad]

So the ATO assumed that there were no big bosses living outside of Sydney? Hmm, interesting premise, that one.

Yes, and they only drive Rollers, Ferrari, Porsche & S-Class.

I must speak to my wife. She's been a Director for almost 2 years now & drives a Mondeo. One of our best friends is a partner in a major town planning firm & only just stopped driving her 8 year old RAV4 - because somebody ran into it & killed it.

In some ways, I believe what zBeasty has said, because it was a crap bit of policy obviously based on crap information about who drives what & where.