FBT Solutions

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Author: Paul

Key change for 2012 – reform of SFM car rules

The reforms will apply to all car fringe benefits after10 May 2011, unless it can be proved that there was a pre-existing commitment in place to provide a car prior to that date, either an existing lease or a commitment to a new lease. A commitment is considered entered into at the point that there is commitment to the transaction, and it cannot be backed out of. The commitment needs to be financially binding on one or more of the parties. Therefore, it will be important to understand the application of the rules for both FBT purposes and in determining after tax contribution amounts.

Changes made after 10 May 2011 to commitments existing prior to 10 May 2011, such as re-financing a car, altering the duration of an existing contract or changing employers, are new commitments and will therefore be subject to the new arrangements. Under the transitional rules, if the amendments (new commitments) do not apply at the start of an FBT year (or from the time the car was first held if that happens after the beginning of the FBT year), the amendments will instead begin to apply from the start of the next FBT year as follows:

Thresholds

Existing   rates to 10 May 2011

New   rates after 10 May 2011

2012

2012

2013

2014

2015

0 – 15,000 kms

26%

20%

20%

20%

20%

15,000 – 25,000 kms

20%

20%

20%

20%

20%

25,000 – 40,000 kms

11%

14%

17%

20%

20%

More than 40,000 kms

7%

10%

13%

17%

20%

Therefore, the key point is that whilst a car may be subject to the new rates, the application may not occur until the first day of the next FBT year. This requires 2012 FBT return preparers to flag these changes for the 2013 FBT return.

If the above changes are not carefully considered at 2012 FBT return time for each car, and flagging of cars in transition, then this will create further work for 2013 FBT.



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