There are lies, damn lies & then there's Treasury statistics
Press Release - Wednesday, 31 July 2013
Tax experts have today decided to ‘set the record straight’ on a number of comments and representations that have been attributed to the Rudd Government as part of justifying the changes to the FBT rules for cars under the statutory formula method. Listed below are a number of comments/observations that are attributed to various ministers within the Rudd Government, along with the correct information.
The National Tax and Accountants’ Association (‘NTAA’) has taken this rather unusual step because of the level of misinformation that is currently in the public domain.
Issue Number 1: Government statistics estimate that 66% of people packaging cars and who may be affected by these changes earn over $100,000 a year – Treasurer Press Release issued 18 July 2013
Wrong. According to the Australian Salary Packaging Industry Association (‘ASPIA’), 70% of drivers who package a car and may be affected by this proposal earn less than $100,000.
In other words, this proposed change to the tax law will most adversely affect teachers, nurses and police officers, and not the high flyers suggested by the Rudd Government.
Issue number 2: "There's a lot of people clearly fiddling the system and let me tell you clearly as I sit here in the Sydney CBD, the chances are it's not a Holden Commodore, it's a BMW…" – quote attributed to Federal Transport Minister Anthony Albanese being interviewed on SKY news
Wrong. According to the ASPIA, the average cost of a car salary packaged by people who may be affected by these changes is approximately $34,500. This is hardly going to involve a person salary packaging a BMW that is being driven around the Sydney CBD.
Issue number 3: ‘Under the Statutory formula method, tax is only payable on 1 kilometre in every 5 that a person travels, even though the car may never by used for business purposes’ – quote attributed to Federal Transport Minister Anthony Albanese
Wrong. Under the Statutory formula method, fringe benefits tax (‘FBT’) is payable on 20% of the purchase price of the car that has been packaged by the employee. This 20% rate is applied to the car’s purchase price and nothing within the FBT Act makes reference to FBT being payable on only 20% of a car’s running costs.
Therefore, to suggest that FBT is only payable on 1 in every 5 kilometres travelled by an employee is, at best, a misunderstanding, or at worst, completely misleading.
Issue number 4: ‘It is estimated that around 320,000 people are currently salary sacrificing a car under FBT rules.’ - Treasurer Press Release issued 18 July 2013
Wrong. It has been estimated by the finance industry and confirmed by ASPIA, that the number of cars packaged under arrangements that may be affected by these new reforms is more than 500,000.
Put another way, leading experts in the salary packaging industry believe that the Government has under-estimated the number of cars that may be affected by this reform by over 56%!
Issue number 5: ‘… you can choose which three months over a 12 month period so you don't choose the period when you're on holiday and you're not using the car for work purposes; you can choose to do it when you're doing your most work related travel to maximise your tax concession. That's fine…’ - Interview of Chris Bowen, Treasurer, with Ross Greenwood on 23 July 2013
Wrong. An employee must make an estimate of their business use of a car over the entire year, and they are not entitled to select the 12-week period that produces the best tax result. Any taxpayer adopting this approach would be subjected to a tax adjustment from the Tax Office and they would also incur penalties and interest charges.
The FBT Act makes it extremely clear that any employer found to be undertaking the above strategy will breach the law.
Andrew Gardiner, spokesman for the National Tax and Accountants’ Association, today stated ‘It's not surprising that the general public is confused about who will be affected by these changes and the impact they will have on the economy.’
‘Let’s get things straight. These changes will have a massive effect upon the car industry in Australia and they will also hurt hard-working Australians like teachers, nurses and police officers.’
Andrew Gardiner also stated ‘This is a destructive policy that is being justified on the basis of information that presumably has been provided by Treasury. We strongly recommend that the Rudd Government rethink this policy in light of the new information that has been supplied by the motor vehicle industry, before more damage is done to the Australian economy.’
www.ntaa.com.au
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