FBT back on track under new Coalition government

These arrangements meant an employee could use pre-tax income to acquire a new car. That meant significantly increased buying power. Employers who facilitated the transaction were effectively rewarding their workers with a significant benefit at little or no cost to themselves. Thirdly, the struggling local carmakers were handed an ongoing increase in demand for their cars, because up to 80 per cent of locally made cars are either bought by fleets, or subject to a salary sacrifice arrangement.

This is perhaps the most perplexing aspect of the entire decision to axe FBT concessions. A succession of Federal Governments has given the local carmakers a total of $5.4 billion in taxpayer funded government grants over the past decade. It did not make sense to pump all these funds into the production side of the local car making equation, only to choke off the demand side by cutting the FBT concessions. Especially at a time when the local carmakers are under tremendous commercial pressure.

In addition, the Rudd Government’s policy added substantially to the administrative burden of many businesses. Instead of merely claiming the concession and being done with it, all businesses attempting to claim any vehicle deductions whatsoever would now be required to maintain vehicle log books.

Clearly, FBT concessions had played – and continue to play – a major role in local car manufacturing, and the health of the automotive sector, principally be being a major demand stimulus.

Just four days before the Federal election, Prime Ministerial aspirant Tony Abbott and his then shadow treasurer Joe Hockey made concrete their commitment to reinstating the FBT concessions, effectively reversing the Rudd Government’s changes. In an open letter, they said: “A Coalition Government will not proceed with the Labor Government’s poorly thought through changes to the Fringe Benefits Tax arrangements on cars.

“In particular, we want to acknowledge the role that the car leasing and salary packaging industry plays in assisting with new car sales, generating demand and, therefore, generating jobs.”

It didn’t take long for the Coalition to act, following the bloodbath of the Federal election. Just five days after Tony Abbott became Prime Minister-elect, Coalition Finance spokesman Andrew Robb declared Labor’s take on FBT policy “dead, buried and cremated” – to wide industry acclaim.

Bill Baker CEO at www.novatedleasing.com.au said, “This is a terrific result for the [Australian] economy... a real stimulus package with no downside. Increased demand will help secure jobs in the car industry, and at the same time businesses and employees will benefit as well".