The old FBT company car rules resulted in some quite ridiculous outcomes. In fact they still do, because apparently they still apply for existing leases.
Basically the rules meant that the further you drive, the less tax you pay. Which means people were strongly encouraged to drive long distances to save money — often driving for no real reason other than to make it into the next distance bracket and get a lower rate.
- Less than 15,000km travelled a year – 26% FBT liability = 0.26 statutory fraction
- 15,000 – 24,999km – 20% = 0.2 statutory fraction
- 25,000 – 40,000 – 11% = 0.11 statutory fraction
- Over 40,000km travelled in a year – 7% FBT liability = 0.07 statutory fraction.
I don’t know what genius came up with the way the tax laws worked, but really, what an utterly stupid system.
The other day I heard of a friend of a friend who has got her car doing the ultimate: I forget the precise numbers involved, but basically in order to avoid a big tax bill she needs to put thousands of kilometres on the clock by the end of the year.
Rather than spend the week going on a pointless long drive, her mechanic has devised a scheme whereby the car is up on blocks, and is set up so it can drive while stationary. Presumably they’ve put a brick on the accelerator and/or put it into cruise control, and the car is clocking up all those kilometres while not having to have a driver in it.
Quite amusing in a way, but this is the result when there are stupid laws.
Thankfully the tax system has changed, and for new leases signed since May, a more sensible flat rate system applies.
5 replies on “Fringe Benefits Tax craziness: driving, going nowhere”
“I don’t know what genius came up with ..”
Answer: The motor vehicle industry lobby!
Thankfully, a Labor Government has changed the rules to make more sense, but there is a phasing in period.
But as Ferris Bueller discovered, putting the car on blocks and leaving it running in reverse does not do the opposite :)
Yep, it’s an absurdly stupid system. Thankfully as you’ve said its been stopped now, and it will be phased out.
@Chris – Hehe, exactly what I was thinking of!
and all this time I thought those FBT rules were worsening congestion when in fact all those company cars were sitting up on blocks out of the way…???? A fantastic policy outcome, and proof that taxpayers should subsidise the purchase of car jacks for company cars.
The supposed original rationale was that anyone doing 40k+ a year must be some kind of travelling salesman who shouldn’t be paying much FBT.
The real reason, is the small number of influential bigshots who commute from Portsea and Bowral.