Selectus applauds the Federal Government encouraging a reduction in kilometres travelled to reduce exhaust gas pollution and the changes in the May 2011 budget to support this.

Previously FBT liability was reduced by the higher kilometres travelled. Often Employees who travelled less than 15,000 kms per year did not give significant consideration to Salary Packaging a vehicle through a Novated Lease.

With the changes brought down in the May 2011 Budget the statutory rate drops from 0.26 to 0.20 for those employees who travel less than 15,000 kilometres per annum a Novated Lease is now a much more viable proposition to many more people and provides significant benefits and opportunity to our Employer Clients and Employees.

More employees are now going to recognise the advantages available through their Employer provided Benefits.

New Arrangements

• A flat statutory formula of 20% will replace the previous scale regardless of how many kilometres vehicles travel in an FBT year.
• Transitional arrangements apply up to 31 March 2014 for vehicles travelling in excess of 25000 kms per year.
• From 7.30 pm on 10 May 2011 the following statutory rates will apply to any new Novated Lease:
  
  

Distance Travelled in FBT Year

Existing Contracts

New Contracts entered into after 7.30pm 10 May 2011

Pre-Existing Novated Lease Contracts

It is important to note that all pre-existing novated lease contracts with a commencement date prior to 7.30 pm 10 May 2011 will be allowed to continue under the previous arrangements until the lease expires.

New Benefit Summary

For new salary packaging contracts commenced after 7.30pm 10 May 2011:

• employees travelling over 25000 kilometres per year will have a reduced net benefit. The reduction will be transitioned up to 31 March 2014.
• employees travelling under 15000 kilometres per year will have an increased net benefit
• employees who travel between 15000 and 24999 kilometres per year will have no changes to net benefit when salary packaging.

The following table highlights the impact. Examples show the change in statutory fraction once the flat 20% is applied to all packaged vehicles:

*Assumptions Used: Value of Vehicle salary packaged: $35,000
Employees taxable salary: $75,000
Employer: Private sector
Vehicle Finance Period: 4 years

**The benefits shown in the above table are calculated by comparing payment of finance and operating costs from after tax dollars to an Employee salary packaging the same costs.


Selectus welcomes these changes and the new opportunities we can provide Employers and their Employees.

Selectus provides salary packaging administration and fleet management for many Private Sector, Government and PBI/Charitable organisations throughout Australia.