Economy

Jul 23, 2013

FBT coverage is nothing but self-interested hysteria

The government wants to trim FBT -- and interest groups are up in arms about it. Accountant and former economist John Lawrence explains why you should think twice before believing the hysteria.

Hysteria from interest groups whenever governments announce plans to trim handouts usually indicates an absence of suitable contra arguments. Government plans to change the fringe benefits tax treatment of motor vehicles is a case in point.

14 comments

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14 thoughts on “FBT coverage is nothing but self-interested hysteria

  1. Michael

    Shame on you John Lawrence for selectively quoting the Henry Tax Review. As well as your quote above it also specifically stated that the various statutory formula rates for motor vehicle fringe benefits should be replaced with a single statutory rate of 20%.
    Not sure if you’re being mischievous or just lazy. Cheers, Michael (and my car is not leased)

  2. drmick

    Finally; the other side of the story. Don’t they squeal loudly, the very rich few? How egalitarian that those who cant afford those cars help wealthy people pay for theirs instead, just like they also do for education and health. Off with their heads & their Alfa Romeos

  3. D

    “A $50,000 car now results in an annual fringe benefit of 20% or $10,000 (…) Grossing up the benefit and then applying the FBT rate of 46.5% results in FBT of $9,600. ” – I don’t understand the maths being applied here. Where does the $9,600 come from? Wouldn’t 46.5% of $10,000 be $4,650?

  4. Mark from Melbourne

    @Michael – the story kicks off with “Following the Henry Tax Review, the statutory formula of 20% was adopted regardless of distances travelled.” What’s your point?

    I no longer sal-sac but did for years and I have no doubt that most people who did same were predominantly for private use. It’s been rorted.

  5. Robert Kirby

    The hysteria is magnified by the Coalition’s double speak on the ‘age of entitlement’. There is nothing wrong with claiming expenses that are justified in the course of running a business. Remember also FBT is paid by the company – not the individual. Personally, I am surprised that the Tax Office has not yet focussed on the company-provided mobile phones. Smartphones are driving up the cost of mobiles and should be fertile territory for an FBT regime?

  6. Frank Birchall

    Great article, John — many thanks! Gottliebsen’s comment re “a good job of tax cheating” reflects, in my opinion, typical rusted-on LNP thinking about what they are entitled to in the “age of entitlements”.

  7. john lawrence

    D the net benefit received is $10,000.Imagine if you received $10,000 and your tax rate was 50% then this would imply that your gross was $20,000 and the tax thereupon was $10,000 resulting in a net of $50,000.

  8. john lawrence

    D that should have read “…. resulting in a net of $10,000.”

  9. Margaret Ludowyk

    Great article. Seems there must be lots of people ripping off the tax system if a whole industry is to be destroyed by this change.As for Gottliebsen’s comment, pretty much sums up the attitude of many wealthy people who think they are too important to pay tax like the rest of us. Whatever the rules their over paid creative accountants will find a way around them.

  10. drsmithy

    I no longer sal-sac but did for years and I have no doubt that most people who did same were predominantly for private use. It’s been rorted.
    I imagine this is most people’s experience.

    I know dozens of work colleagues who salary-sacrifice their vehicles. Not one of them has any reason to need a vehicle to perform their primary function, and for those times when they need to get from the office to somewhere else, cabcharge vouchers are handed out with barely so much as a “what’s it for?”.

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