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Fringe Benefits Tax: reform of the car fringe benefit rule – Post implementation Review – Department of the Treasury

In the 2011-2012 Budget the Government announced a change to the statutory formula method for determining the taxable value of car fringe benefits. The measure implemented a recommendation of the Australia’s Future Tax System Review. The then Prime Minister granted an exceptional circumstances exemption for his Government’s tax reform agenda in response to the Australia’s Future Tax System (Henry) Review which included changes to the car fringe benefit rule.  Consequently, a Post-Implementation Review was required to commence within one to two years of the reform of the car fringe benefit rule. The measure applies a single statutory rate of 0.20 to a car’s value to determine the annual taxable value of car fringe benefits. Prior to the 2011 reforms, the statutory rate comprised a sliding scale based on the number of kilometres travelled by the car for a year rather than a single statutory rate. The single statutory rate applies to arrangements entered into after 7:30pm AEST on 10 May 2011 regardless of the distance travelled during the fringe benefits tax (FBT) year. Changes for new contracts were phased in over four years. The Senate Economic References Committee, which conducted a review of the changes, noted that the move to a single statutory rate affected taxpayers differently depending on the number of kilometres travelled. The Committee found that the measure reduced complexity and had economic efficiency benefits that would be achieved once fully implemented. The Post-Implementation Review concluded that the measure meets its objectives and has a low impact on businesses and community organisations. The Post-implementation Review completed by the Department of the Treasury was assessed as adequate by the Office of Best Practice Regulation.