17 Jul 1313 Proposal to abolish FBT statutory formula for cars
On 16 July 2013, the Treasurer, Chris Bowen, made the following statement at a press conference at which the Prime Minister announced the "termination" of Australia's carbon tax and the move to an emissions trading scheme.
"We're also making some general savings decisions and announcing those today making a contribution to paying for the decision that we're announcing.
We're abolishing the statutory formula in relation to fringe benefits tax on cars and I'll just spend a couple of minutes on this because this is a significant savings decision.
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.
It's important to note that many tradespeople and others who already use log books are not affected by this change.
In fact it does not affect the 3.6 million Australians who directly claim the fringe benefits tax relief through their tax returns.
It 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 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."
The abolition of the statutory formula method will take effect from 1 April 2014.
The Treasurer has also released a factsheet entitled "A fairer treatment for FBT on cars" that can be accessed here
Note that this change will need to be legislated either by the current Government or the incoming Government that will be elected at the next election. Until then, it remains only a proposal.
For a transcript of the press conference, go here