Motor vehicle tax-break changes
One of the changes announced in the federal budget will benefit small businesses that need motor vehicles for their employees (such as tradesmen). From 1 July 2012, small businesses can write off the first $5,000 of any motor vehicle purchased for use in the business. The remainder of the purchase price can be transferred into the general small business depreciation pool, which is depreciated at 15% in the first year and 30% in later years. This measure will replace the Entrepreneurs Tax Offset.
The other change to affect employees’ packaged motor vehicles is a move to a single rate for Fringe Benefits Tax FBT purposes where the statutory formula is applied. The objective is to remove the incentive for employees with a packaged vehicle to drive long distances prior to the end of the FBT year in order to reduce the FBT payable.
From 10 May 2011, the following rates will apply to new contracts only and will be phased in over four years:
|
Distance travelled in kilometres |
Current rate |
From 10 May 2011 |
From 1 April 2012 |
From 1 April 2013 |
From 1 April 2014 |
|
0 – 15,000 |
26% |
20% |
20% |
20% |
20% |
|
15,000 – 25,000 |
20% |
20% |
20% |
20% |
20% |
|
25,000 – 40,000 |
11% |
14% |
17% |
20% |
20% |
|
> 40,000 |
7% |
10% |
13% |
17% |
20% |
Employees on existing contracts will retain their current FBT rate until they enter a new contract.
We believe that people who drive less than 15,000 kilometres per year in their cars, will incur a lower FBT cost.
Speak to your Bongiorno adviser about salary packaging and how these changes could affect you.
Sources:
MLC Technical Update 10 May 2011