Employer News

2011-12 Budget Review Update – 16 May 2011

As you may already be aware, the Federal Government announced a change to the way Fringe Benefits Tax (statutory percentage) is applied to salary sacrificed cars in the 2011-12 Federal Budget released on Tuesday 10 May.

While the final legislation is not yet available for review, with the benefit of direct discussions with the Treasury Department we have gained a much clearer understanding of how the legislation is intended to apply. As further information comes to hand we will keep you updated, in the meantime, this note provides you with the latest information.

Latest Budget update

The Federal Government’s decision to progressively change the current statutory percentage for calculating Fringe Benefits Tax from a tiered rate to a flat rate of 20%, regardless of the kilometres travelled, came into effect for all leases commencing after 7.30pm (AEST) on Tuesday 10 May 2011.

The statutory rate for each year is detailed in the table below.

• For drivers travelling 25,000km and over during the FBT year the new statutory rates will be modified each year within the term of the lease over the next four years.
  So a customer driving more than 25,000km who entered a novated lease after 7.30pm (AEST) on 10 May 2011 will have a rate at the start of their lease, which will be revised each year until 1 April 2014 when a 20% standard rate is achieved.
• Those travelling less than 25,000km will now be on a flat statutory rate of 20% for the term of the lease.
• The Budget changes will see all leases, regardless of kilometres travelled, have a standard statutory percentage of 20% applied by 1 April 2014.
• There is no change to customers who commenced a novated lease arrangement prior to 7.30pm (AEST) on 10 May 2011.

2011-12 Budget Review - 11 May 2011

The Federal Government announced a change to the way Fringe Benefits Tax (statutory percentage) is applied to salary sacrificed cars in the 2011-12 Federal Budget released on Tuesday 10 May.

Our tax specialists have reviewed the budget papers to provide you with useful information about the changes and what they mean for you.

It’s important to note there is no change for novated lease holders who commenced their lease prior to 7.30pm (AEST) on 10 May 2011.

You will still derive the same benefits and tax savings you selected when joining our program.

For more information about the Federal Budget 2011-12 please go to www.budget.gov.au


Geoff Kruyt
Group Executive – Novated Leasing and Fleet Operations


Federal Budget snapshot

According to the Budget papers, the Federal Government has decided to change the statutory percentage for calculating Fringe Benefits Tax from a tiered rate to a stepped rate to be applied over the next four years to all leases commenced from 7.30pm (AEST) 10 May 2011.

Customers who commenced their novated lease agreement prior to 7.30pm (AEST) 10 May 2011 will remain on their current arrangements. There is no change to how their FBT is calculated.

All customers will still be required to provide regular odometer readings.

Business Comment

There is no change to existing novated lease customers’ arrangements
There is no change to customers who commenced their novated lease prior to 7.30pm (AEST) on 10 May 2011.

Vehicle leasing remains tax-effective
This change in policy should not deter people from choosing to salary package their car as there are still valuable tax savings to be made in most cases.

Vehicle leasing may now benefit more people
Employees who travel less than 15,000 kilometres per FBT year will now get a greater benefit with a novated lease under the new FBT rate.

People who drive high kilometres could still save tax
A novated lease could still offer customers with high kilometres potential tax savings and benefits. The benefit has been slightly reduced not removed.

Superannuation Contribution Amendments

Concessional Contributions for Over 50s

In the 2011 Federal Budget the government confirmed that as of 1 July 2012, a higher concessional contributions cap will apply for anyone over 50 years who has total superannuation balances of less than $500,000. The higher cap for over 50s will always be $25,000 above the standard cap.

When the standard $25,000 cap is indexed, the higher cap will be the new indexed amount plus $25,000. For example, when the standard $25,000 cap is indexed to $30,000, the higher cap for those over 50s whose superannuation balance is less than $500,000 will be $55,000.

The general lower contributions cap of $25,000 will be indexed annually by the CPI. The dollar value of this increase will also be applied to the higher contributions cap.


Excess Superannuation Contributions

In order to reduce the effects of minor and inadvertent breaches of the concessional superannuation contributions cap, the Federal Government announced that employees who breach their cap by up to $10,000 can request to have the excess funds returned to them, with PAYG deducted at their prevailing marginal rate of tax.

It is important to note that this concession will apply to the first time cap breaches only, commencing from 1 July 2011.