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8 frequently asked questions about the FBT changes answered

Jul 26, 2013

I’ve spoken on several occasions about the benefits of using a log book to track your vehicle’s expenses and usage. By maintaining a record of capital costs, upkeep and other outlays you can claim your vehicle as a tax deduction.

Many of you have been concerned about the change and what it means for you – below are eight answers to your most common questions.

1.    What exactly are these changes?

The proposed changes will replace the current statutory method of calculating Fringe Benefits Tax (FBT) for novated leases on vehicles, (i.e. either salary packaged, salary sacrificed or otherwise provided by an employer), with the existing log book method.

Although these methods currently exist as two alternatives, from the 1st April 2014 for new lease contracts or pre- existing leases that are adjusted, the log book method is the recommended solution. 

The ATO is engaging in stricter actions against people that willingly or by mistake manipulate their work claims for their own benefits. With the use of a log book, the possibility of fraud is reduced. The log book is a perfect method to provide and keep track of your trips and expenses.

2.    What does that mean in laymen terms?

Under the status quo, it was possible for people using a company vehicle to claim their car was driven for a minimum of 20% of personal kilometres – whether that was true or not. They could then pay only 20% tax on a vehicle which could have been 99% personal-use.

Under the new scheme, employees with company vehicles will have to start paying tax on the actual proportion of the vehicle, (capital expenses, incidentals and upkeep), which are personal use.

3.    Who are these changes going to affect?

This is a reform that’s going to have a flow-on effect from the Australian car manufacturing industry, to the car leasing industry, as well as large corporations that include company cars as part of their benefits as standard.

It will have a smaller effect on small or medium businesses that provide vehicles for employees. This change is set to affect about 330,000 Australians driving company vehicles. Of those, 80% are in the public sector.

While this might sound like a lot of people, the vast majority of Australians will be unaffected.

4.    When? 

Changes will apply to all new contracts into after the date of 16th July 2013. The changes will come into full effect from 1st April 2014.

5.    What does this mean for me as a driver and taxpayer?

If you’re one of the drivers affected by this change, don’t panic – unless you are claiming more than you are entitled to, you are probably not going to feel any appreciable financial difference at all.

The requirement is to keep a log book for 12 weeks every 5 years. 12 weeks of regular bookkeeping could save you a lot more than you think as you will be able to pay a little more attention to your car usage. As such you might realise that cost savings and fuel economies are feasible provided you service your vehicle or upgrade it.

With an automated app it is unlikely this record keeping will become a noticeable drain in terms of time or paperwork. Treasurer Chris Bowen says:

“Many of these apps will let the the smartphone do most of the work for you and let you send the results directly to your employer or tax agent - no calculations required.”

 

6.    What does this mean for an employer and provider of company vehicles?

For large corporations – (seen as the target of the changes to the FBT) – it might not be as attractive to liberally throw luxury cars into executive salary packages. However, the bottom line is not going to be greatly affected. Bringing enterprise grade logbook solutions should help keep the FBT liability from going through the roof.

For small and medium enterprises, there is still a raft of tax deductions available for those who genuinely can claim vehicles for business purposes.

Independent workers - The ATO will be targeting tradies, sales and marketing managers who incorrectly claim high work related expenses. Make sure you keep your expense records in order.

7.    How can I use this to my advantage?

If you are not already using an automated car reporting system, the new changes of the FBT should be the reason that prods you into action. That is why www.Your Car Log.com was designed, a simple tool to take away the pain of record keeping and handle the FBT requirements on your behalf.

For those of us who get in early, this change is a great opportunity to save ourselves some bookkeeping stress and get ahead of the curve.

8.    So what do you recommend?

As you need to use the log book method, make sure you pick up all your deductible trips to maximise your work-related percentage and using an application like Your Car Log is a great way to beat the taxman.


 

Julian Khursigara is the COO of www.YourCarLog.com and has extensive knowledge in taxation, and provides up to date tips on topics associated to work related car expenses.

Tags: Accountant SydneyCompany taxDeductionsEmployeesEmployersFBTPersonal taxTravel

Author: Julian Khursigara

Comments

"Hi. I'm in the Army, and currently lease a car thru smart salary. Will these changes affect me?"

By: James on Jul 31, 2013 9:38AM

"No impact on your existing lease. The proposed changes only affect future leases entered into after the announcement by the Government."

By: Mr Taxman on Aug 14, 2013 8:00AM

"Hi, I have a company car at present, and was considering changing to a car allowance thorugh eitehr elasing, or taking the allowance and paying for a car my self. How have these chnages effecteed wither decision please, should I stick with the company car ? "

By: Dan on Aug 20, 2013 5:49AM

"With the change to the Coalition Government last week, it looks like these changes will not be going ahead."

By: Mr Taxman on Sep 19, 2013 4:48AM

"Great breakdown of the impact of the new FBT laws. Navman Wireless has an ATO class ruling to provide log books for vehicles. It is real time , automatic by demanding the data from the driver every time he/she turns the key and it presents the data in CSV or excel. This combined with our ability to improve productivity, reduce costs around fuel and maintenance , improve customer service and meet the business needs to provide a safer workplace(the new WH&S laws outline this) , means that Navman Wireless is complete business tool. Take this as an opportunity not only to manage the FBT issue but also dramatically improve your whole business productivity and employee safety. Michael Carter National Sales Manager Navman Wireless 0403453060"

By: Michael Carter on Sep 04, 2013 8:51PM

"If you want to get a better advertisement on this site Michael, get in contact with me directly. Guerrilla marketing rarely generates success."

By: Mr Taxman on Sep 19, 2013 4:49AM

"I'm about to get a car under my co as trust. Will be using approximately 70% for work and 30% personal. In order to avoid FBT I will pay for my personal expenses incurred. Do I still need to register for FBT?"

By: Alee on Oct 28, 2013 11:43PM

"Hi, I have use of a co. vehicle(odo:185000kms) which the co. bought in 08. I have been driving it for the last 5 years and only today I have been asked to sign a FBT form - 'sign here and write 100% here' was the "explanation". This is the first time i've been asked to sign anything in relation to a co. vehicle. Is this normal? Is there something fishy going down?? "

By: Sid on Apr 17, 2014 11:33AM

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