Novated Lease

Changes to FBT rules

Monday, 05 September 2011 14:38

Back in May, there were some changes to the way that FBT is calculated on Company vehicles. This has lead to a much simpler way of calculating the tax, but in the interim I have been asked many times how this impacts existing contracts, so below I will try and explain in plain English.

One thing is clear, there is no longer a benefit for those travelling large numbers of kilometres per annum because there is now one flat rate of 20% across the board.

HOW THE OLD STATUTORY FORMULA METHOD WORKS

Under the old statutory formula method, the taxable value of car fringe benefits is based on the cost of the car multiplied by the relevant statutory percentage. The percentage depends on the number of kilometres the car has travelled, taking into consideration the number of days in the year that you provided car fringe benefits.

Where the last commitment in relation to a car has been entered into before 7.30pm AEST on 10 May 2011 the old statutory rates will continue to apply, as outlined in table 1.

However, if a pre-existing commitment is altered, it may be considered a new commitment that is subject to the new arrangements.

Table 1

 HOW THE NEW STATUTORY FORMULA METHOD WORKS

The new flat statutory rate of 20% applies regardless of the distance travelled.

The new flat rate applies to all car fringe benefits after 7.30pm AEST on 10 May 2011, except where there is a ‘pre-existing commitment’ in place to provide a car.

All pre-existing commitments will remain under the old statutory rates unless there is a change that would amount to a ‘new commitment’.

So there you have it, plain and simple up until April 2014, but if you have any other questions relating to this, make sure you talk to the people at FinCar.