So says the Australasian Fleet Management Association (AfMA), which adds that the changes have been announced without consultation and is now asking the Australian government to consider the consequences.

AfMA outlines that FBT legislation is applicable to any non-salary benefit (ie private use of a company supplied vehicle) an employee may receive from their employer. In the instance of company-supplied vehicles, it is a tax levied on the employer not the employee. The only time that this tax becomes the responsibility of an individual (employee) is where a “novated lease” is concerned and the lease payment is made via “salary sacrifice” ie in pre-tax dollars.

The salary sacrifice option is a part of current FBT legislation and AfMA says it is being caused great concern that people using this legitimate framework (implemented and maintained by successive governments) are labelled as rorting the system.

Of all those vehicles that are subject to FBT it would be less than 10% that could be classified as being of a salary sacrifice nature. The remaining 90%, which we estimate as approximately one third of fleet vehicles, are company supplied for which the company, and not the individual, is responsible for the payment of applicable FBT.

In the wider context of business, it is essential to appreciate that the fleet industry plays a significant role in national economic activity as fleet purchases account for more than 50% of all new vehicle registrations.

Under the proposed legislation, all businesses will now be required to abandon the Statutory Method, which will result in a significant rise in the FBT liability.

In comparing the applicable FBT payment for a vehicle, valued at $35,000, evaluated under the statutory formula of 20% against one using the operating cost method, with non-business usage at 80%, we see an increase in the FBT cost of almost 67% (over $4,500). That’s an additional $4,500 per vehicle and for a 100 vehicle fleet this equates to an additional cost of $450,000 per annum.

In these cases, it is likely that companies would be quick to divest themselves of the vehicles by fleet reductions, and/or by providing a vehicle allowance to the affected employees as an alternative. These actions will adversely impact on new vehicle sales and initiate a rise in grey fleet vehicles (which are personally owned vehicles used for business purposes), presenting serious OH&S and sustainability issues.

Adding to the impost of these changes financially and operationally will be a dramatic increase in the administrative burden to business, requiring each vehicle to undergo a unique calculation to determine the FBT applicable each year.

AfMA says it sees the changes as so profound and far reaching that it will take some time to fully appreciate the extent and impact they will have on many sectors of the economy.

In response, AfMA is calling on fleets to highlight the issue colleagues and peers and evaluate the impact of FBT changes to your business.

It is also urging fleets to communicate their concerns to:

AfMA: Website: afma.net.au email: [email protected]

The Treasurer: The Hon. Chris Bowen MP Email: [email protected]

The Shadow Treasurer: The Hon. Joe Hockey MP Email: [email protected]