Reforms to Car Fringe Benefits - How will it affect you?

Reforms to Car Fringe Benefits - How will it affect you? from Pritchard Lees

By: Pritchard Lees  08-Aug-2011
Keywords: Accountants, Accounting Services, Accounting & Bookkeeping Services

Reforms to Car Fringe Benefits - How will it affect you?


The government has enacted legislation which changes the statutory formula method to calculate car fringe benefits.

The legislation applies to all car fringe benefits after 7.30pm Australian Eastern Standard Time (AEST) on 10 May 2011; unless it can be proven that there was a pre-existing commitment in place to provide a car. A commitment occurs when a financially binding decision to acquire a car has been made and that decision is binding on one or more of the parties.

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

Refinancing a car, altering the duration of an existing contract, or changing employers after 7.30pm AEST on 10 May 2011 are considered new commitments, and will result in the new arrangements applying.

The legislation replaces the current progressive rates with a flat statutory rate of 20% that applies regardless of the distance travelled. For new commitments, the flat rate will be phased in over four years, unless the employer chooses to skip these transitional arrangements and move straight to the 20% rate. However, if the employee is disadvantaged by the employer's decision, employee consent is required.

Employers will still be able to use the operating cost (or log book) method, which ensures that any business use of the car is excluded from the taxable value of their car fringe benefits.

Employers and employees who seek to end existing contracts early and immediately enter into new contracts just to get the benefit of the new arrangements may be caught by the general anti-avoidance provisions.

For more information, please .

Keywords: Accountants, Accounting & Bookkeeping Services, Accounting & Tax Services, Accounting Services, Auditing, Business Planning, Chartered Accountants, Company Secretarial Services, Financing, Income Protection, Life Insurance, Loan Applications, Strategic Planning, Trauma Insurance, Wills & Estate Planning

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