New Fringe Benefits Tax (FBT) regulations applying to company vehicles may assist in reducing carbon emissions and ease road congestion, according to leading fleet solutions company FleetPartners. But this will come at a big cost to all businesses requiring the use of vehicles.
The Federal Government introduced changes to the FBT concession on companyprovided cars from the previous sliding scale to a flat 20% in the Federal Budget.
The Government argues that the current FBT rates – which range from 7% for vehicles travelling more than 40,000 kilometres a year to 26% for vehicles travelling up to 14,999 kilometres – encourage motorists to drive further to increase their tax concession. This system will be replaced by a single flat rate of 20%, the rate currently applied to vehicles travelling between 15,000 and 24,999 km a year. The changes are designed to remove the current incentives, inherent for novated leases.
Traditionally, personal tax could be reduced for employees with higher annual mileage. Under the new scheme all taxpayers will receive the same level of FBT concession regardless of the distance travelled whether the vehicle is a tool of trade or novated lease.
Environment, local industry winners
FleetPartners CEO, Nick Johnson, said the new tax rules would add complexity to business reporting despite being advocated as a simpler regime.
“We supported the simplification of FBT on company-supplied vehicles as endorsed by the Henry Tax Review. Whilst any incentive to drive less is welcome, as it will reduce carbon emissions, fuel consumption and potentially ease road congestion, companies will now have to consider introducing stricter reporting practises.”
“If employees travel over 25,000 kilometres, businesses may need to define travel usage between business and personal. It’s a potential double blow – increased administration
burden and higher taxation,” said Johnson.
Tool of trade costs to rise
He warned that owners of Australia’s approximately 500,000 tool of trade vehicles could face higher running costs and tougher compliance under the new FBT regime unless they reviewed the operation of their fleet and its management.
“The introduction of a 20% flat rate will have major cost implications for tool of trade fleets which predominately use the current statutory method for calculating FBT.”
“When we look at our customers we see that most tool of trade vehicles fall into the top two annual mileage brackets. Under the new system if a vehicle travels 40,001 kilometres per year or more the FBT would increase from 7% to 20%, up from $2352 to $6720.”
“For the typical business operator of a 50-vehicle fleet this represents a 28% increase in cost, or an extra $220,000 per annum. Overall our fleet customers face an extra $50 million in FBT cost if they maintain the statutory method under the proposed flat 20% regime.”
“Those driving more than 25,000 kilometres a year will be penalised financially unless they keep scrupulous log books and record separate business and personal mileage use.”
Business urged to act now to ease compliance
Johnson said fleet managers faced significant costs to their business and their mobility if they did not move quickly to understand the new FBT rules and introduce systems to manage reporting and compliance.
“There are ways to mitigate the increase in costs that will hit fleets with these changes. It will require an examination of current practises and the introduction of change. FleetPartners has a number of unique tools ideal for assisting fleet managers compare the impact of the changes and costs, including Fleet Optimiser. This is Australia’s first fleet diagnostic tool and it assists customers to analyse their whole-of-life costs and the implications of the FBT changes on their bottom line.
“We have also recently launched TeleMatiXx, a GPS digital log book which can be plugged into a vehicle to provide detailed metrics and helps to report the optimal FBT
regime for customers,” said Johnson.
