Last week’s announcement by the Rudd Government of their intention to streamline eligibility criteria for the Fringe Benefits Tax (FBT) on salary sacrificed employee cars, which avails the Government of approximately $1.8b, was met with a tidal wave of conflicting opinion from Australian business.

Those who shouted the loudest – in particular, the automotive fleet sales industry – predict a substantial downturn in new car sales, as businesses seek to consolidate losses by delaying the upgrade or update of vehicles. 

Businesses who purchase a vehicle chiefly for business will still be entitled to a concession, although it will come at a higher administrative cost. However, those who claim the concession on a vehicle intended for personal use will be taken to task.

Currently, there are two methods of reporting company vehicle usage: log book and statutory rate.  The proposed FBT changes will eliminate the statutory rate method, necessitating greater time spent on administration in the long term, but also in the short term for businesses having to switch methods.

Alarm surrounding this extra administration is being down-played by Treasurer Chris Bowen, who estimates that around 12 weeks of log book entries (including the reason for travelling) over a 5 year period is all that they will require businesses to supply.

It seems likely that Australian SMEs will suffer the brunt of these changes, as they frequently lack the human resources and revenue to ride out the inevitable upheaval that will accompany the changeover. 

My advice would be that, whilst the changes have yet to become law, you would be wise to start preparing now: familiarise yourself with the log book method, if you don’t currently use it; examine your current and future business investments and assess them for areas which may be vulnerable to the proposed FBT changes, and try to restructure them where possible. 

Ultimately, you cannot control the whims of Government - especially in the lead up to an election - but preparation and planning will give you a fighting chance of keeping on top of them.

Doug Mitchell, Partner