Company car crackdown.
PEOPLE who drive company cars for private use face a crackdown in next Tuesday's federal budget, with changes set to save the government about $950 million over four years.
Fringe benefit rules that currently reward people for running up extra kilometres on vehicles financed by salary sacrifice will be toughened. In future there will be no incentive to maximise the distance driven.
The change - which was recommended in the Henry tax review - could be sold by the government as one to conserve fuel and save taxpayer dollars.
The crackdown is a response to evidence that many people have been manipulating the system to achieve higher benefits.
At present, there are four levels of fringe benefits tax applied to cars bought on salary sacrifice, ranging from 26 per cent of the car's purchase price for those driving fewer than 15,000 kilometres a year, down to only 7 per cent tax when the kilometres exceed 40,000.
The figures show spikes at each threshold, suggesting people are deliberately exceeding them to save on tax.
Under the budget changes, the different tax rates will be replaced by a single 20 per cent fringe benefits tax rate, so that all taxpayers get the same level of concession regardless of their mileage.
The effect will be to increase the concession for people driving fewer than 15,000 kilometres a year, maintain the current concession for those travelling between 15,000 and 25,000, and cut it for over 25,000 a year.
Official figures show there are 570,000 cars operating under the statutory formula.
While fringe benefits tax is paid by the employer, it is usually recouped from the employee who receives the benefit. About half those affected by the budget change are likely to be worse off.
On another budget front, Prime Minister Julia Gillard yesterday received a mixed reception for her pilot measure to ensure teenage mothers are in education or training.
From January, teenagers in 10 trial communities, with a child six months or older, and who haven't finished school and are receiving the parenting payment will have to attend compulsory ''support and engagement'' interviews with Centrelink.
Announcing the scheme, Ms Gillard said there were 11,000 teenagers on parenting payments. More than half of them had been on welfare before becoming parents, and 80 per cent of them had not completed year 12. ''These teen parents are at risk of a lifetime of disadvantage if we don't try and make a difference for them. So are their children,'' she said.
Opposition Leader Tony Abbott said the proposal would not work unless matched with a serious effort to boost childcare.
Mission Australia chief executive Toby Hall said: ''Getting in early and making sure teenage mums are kept in touch with education and training to avoid entrenched welfare dependency in later life should be warmly welcomed.'' But he said it would be better if participation in the trials was voluntary.
Greens deputy leader Christine Milne said while it was good to have incentives to get young people back into education, it was not appropriate to tell a young person that they have to put their child in care at the age of one.
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A Crackdown On People Who Drive Company Cars. (Read 1853 times)
