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CHANGES TO FBT ON CARS: THE FACTS

Posted July 18, 2013

The Rudd Government is terminating the carbon tax and moving to a floating price a year earlier, giving cost of living relief to millions of Australians.

To do this we made the choice to tighten the requirements around tax benefits associated with salary packaging a car a under Fringe Benefits Tax (FBT) rules.

Mr Abbott and Mr Hockey have claimed these changes will cause massive damage to the car industry but the biggest threat to the car industry in Australia is the Coalition themselves, who have confirmed they would cut at least $500 million from auto industry assistance. 

There has been a lot of misleading information in relation to the FBT changes so it is important to ensure that inaccurate assertions are corrected.

These facts include:

  • This reform will not affect the more than 3.6 million workers – including employees, the self-employed and sole traders – claiming deductions for work‑related travel;
  • It is estimated that around 320,000 people  are currently salary sacrificing a car under FBT rules;
  • The changes are not onerous, a claimant must simply account for 12 weeks in a 5 year period;
  • The changes will not affect existing commitments, even if the vehicle is on order and has not been delivered yet;
  • Around two-thirds of these people earn over $100,000 a year;
  • Treasury analysis indicates the changes affect around 1 in 6 employees earning over $150,000 a year — compared to around 1 in 25 employees earning between $60,000 and $100,000 a year;
  • Claims that the FBT changes will cause massive damage to industry are alarmist and irresponsible;
  • Legitimate business use of a car can still be salary packaged and there are no changes to other items that can be salary packaged such as taxis, panel vans and utes, as well as laptops and benefits for not-for-profit workers.

 Even putting aside the context of the changes to carbon pricing, the FBT decision is good tax policy. It protects the tax base for the vast majority of Australians who do not benefit from the salary packaging arrangements.

The Australian people are used to the negative politics of fear from Mr Abbott and Mr Hockey, who have made an art form of it for the past 3 years. It is no surprise they are stoking fear again over these changes because they have no credible policies themselves.


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