I have a confession. My car is salary packaged. And I don’t feel guilty about that.
But now I have a government telling me that this is a tax loophole that needs to be closed.
Since Paul Keating introduced fringe benefits taxes it has been perfectly legal to salary sacrifice for a company car, and the federal government has given a tax benefit for that.
The tax benefit is on the basis that the car will be used for work, but instead of charging a per kilometre cost to my employer, or filling in a log book, I can use a statutory formula tied to the number of kilometres I travel.
The assumption is that the more kilometres I travel, the more of them are likely to be for work.
This might be a poor assumption, but I don’t write the laws. I live my life and I try to keep the amount of tax that I pay to a legal minimum.
In my case I don’t know whether that is a poor assumption or not, because I don’t keep a log book, but I suspect it is not a good assumption.
If the government agrees, then they should have said so…a long time ago. Paul Keating has been politically dead for almost 20 years.
In fact, they reconfirmed two years ago that this sort of arrangement was OK, no matter how much business I was doing with my car.
In the 2013 budget Wayne Swan announced that he would change the arrangements so that everyone who salary packaged their car and didn’t fill-in a log book would only pay 20% of its capital value as tax.
So, while I agree that the government can change the law, I object to them branding me as some sort of tax dodger.
I can’t double guess what they are going to think is a reasonable deduction tomorrow and organise my life to take account of that today.
They said it was OK in 2013. How can it be wrong today?
Federal Labor never had my vote, so politically, in my case, it might be smart.
But they did have the vote of many of my fellow “rorters”. This sort of salary packaging is widely used in the NGO sector and the public service.
My barbs are bearable, but when you put the local priest offside because his parish has to raise another $5,000 so he can take communion around after church on Sunday, you’ve moved into a whole different universe.
You would have thought Kevin would have understood that, given that his favourite Sunday media conference backdrop is the lychgate of his local church.
Should have checked his new policy out with his local parish council, they might have a keener feeling for real sin than he does.
The rules haven’t actually changed Graham.
However, you will now need to provide three months worth of record keeping in every five years; to provide typical documentary evidence that the car is a business related deduction.
Hardly an onerous requirement!
Maybe you could “concentrate” your business use during those selected three months?
Even so, I think the enforcement of the existing rules could have been better thought through, and or made applicable only to fully imported vehicles?
There seems to be a lack of entrepreneurial imagination in government circles; given, well crafted tax reform and simplification, would have closed all the loopholes as well as lifting much of the burden from business!
For mine, the real cost of running a motor vehicle, is at the bowsers!
We would do well to find and supply our own locally sourced fuel supplies.
Every vehicle currently plying road or rail, can be tuned to run on CNG.
We have copious local supplies.
A cubic metre of NG has the same calorific value as a litre of petrol. And local suppliers are on the public record stating, even with a fuel excise imposed, they could still supply NG @ 40 cents a cubic metre.
And the NG alternative produces around 40% less carbon, before you calculate how much additional carbon is created exclusively in the refinery processes.
Further, local fuel variants, refined or otherwise, already produces a much smaller carbon footprint.
Alan B. Goulding.
Comment by Alan B. Goulding — July 24, 2013 @ 10:14 am
Graham buy yourself a dual cab ute. It is fully deductable without the paper work.
Comment by Ross — July 24, 2013 @ 6:00 pm
The point I am making is that there is no element of cheating when you abide by a government policy Ross. Although some of those dual cab utes look OK!
Alan, the rules have changed. Not sure where you get the idea that they haven’t. It’s not that they are enforcing something they weren’t enforcing, they are proposing to change the legislation.
Comment by Graham — July 26, 2013 @ 2:19 pm
This system was a tax minimisation scheme from the outset, cunning devious “employers” arranged salaries to pretend that the amount “paid” was a lot less than what it actually was, and that the car was not part of salary but in fact it is!
Basically it means SOME taxpayers are are NOT paying their fair share of the tax burden, it is being paid by those who do not have any of these “nice little arrangements” successive Governments have acquiesced for far to long, but that does not mean they shouldn’t do anything about it now, so I don’t believe anyone has the right to complain if the lack of fairness is slowly being addressed.
Comment by michael william lockhart — July 27, 2013 @ 8:04 pm
You are soooooo right Michael!! The rest of us working mortals simply should not benefit from any fringe benefits or salary sacrifice of any form. Only the politicians are entitled to all kinds of benefits and seriously devious “tax dodging.” Ordinary folks can only be bribed with various “bonuses” (by politicians) just before election only to be termed “illegal” or “unfair” and removed at a later date. Suckers we are!!
Comment by Jolly — July 29, 2013 @ 10:47 pm
A novated lease is a three-way arrangement in which you lease a car from a leasing company as well as your employer arranges to make the payments on it from your pre-tax salary over a given period of time. It also allows you to have the vehicle of your liking without taking a lot of money from the bank. Agreed to the points you have stated.
Comment by contractor management Australia — August 22, 2013 @ 3:29 pm