Thinking about buying a new car? Just in time for Christmas, the Federal Government has passed the Treasury Laws Amendment (Electric Car Discount) Act 2022, making no- and low-emission vehicles exempt from Fringe Benefits Tax (FBT) and a 5% import tariff.
Ordinarily, Fringe Benefits Tax of 47% applies to cars provided through work for private use purposes. Taking a $50,000 vehicle into consideration, this exemption of FBT means a tax saving for employers of up to $9,000 a year. For individuals purchasing via salary sacrifice, the tax saving would be $4,700.
As always, the devil is in the detail, however, and so to be eligible for the favourable tax treatment, motor vehicles must:
- either be battery electric, hydrogen fuel cell electric or a plug-in hybrid (internal combustion/hybrid models are ineligible);
- be first held and used on or after the 1st of July 2022; and
- have a purchase price “at first retail sale” no higher than the Luxury Car Tax threshold of $84,916 for fuel-efficient vehicles.
Second-hand vehicles will also be eligible for the exemption provided they did not cost more than the applicable Luxury Car Tax threshold at first retail sale in the applicable year of sale.
It is further important to note that the FBT exemption applies in full and that no partial exemption is available. For example, if two electric vehicles were purchased, the first costing $84,000 (less than the Luxury Car Tax threshold) and the second costing $85,000 (more than the threshold), the first vehicle would be fully exempt from Fringe Benefits Tax but the second one wouldn’t be.
Also, despite being FBT exempt, the benefit is solely on the employer’s side. Any employee benefiting from a vehicle will still incur a reportable fringe benefits tax amount, the same as they would if FBT were to apply. This technicality prevents any unintended consequences from eventuating, like increasing the number of taxpayers who might suddenly be eligible for government benefits, or impacting those with child support payment responsibilities and other obligations.
For now, the FBT exemption is only available for three years, however, the Government has committed to reviewing the success of this initiative in three years’ time to determine whether or not it continues.
As always, more information is available on the ATO website.
myGov, ATO Systems vulnerability
ABC News recently announced that “fake myGov profiles are being used to hack ATO accounts.” In case you missed it, you can read the full article here.
As we have many times this year, we again urge everyone to exercise caution when online and protect your personal information as best as possible.
Recent ATO Updates
1. Section 100A
On the 8th of December 2022, the Tax Office announced that it had issued its finalised guidance on the treatment of trust reimbursement arrangements where section 100A – an anti-tax avoidance measure – may apply. We advise will be writing to our trust clients in the new year to outline the Tax Office’s view on how the law operates and what the impact may be in each circumstance.
2. Working from Home Deductions
The temporary working from home “shortcut” deduction introduced by the Tax Office in response to COVID-19 ended on the 30th of June 2022, meaning the previously available opportunity to claim a flat $0.80 per hour deduction for working at home is no longer available.
For the current financial year (ending on the 30th of June 2023), only the fixed rate method or the actual cost method will be permissible for the purposes of calculating working from home deductions, and substantiation requirements will apply regardless of which method is selected. Based on the Tax Office’s recent Draft Practical Compliance Guide PCG 2022/D4, the fixed rate method is anticipated to rise to $0.67 per hour for the 2022/23 financial year, up from $0.52 per hour previously.
Asked & Answered
Land Tax
Question: I recently received a Land Tax Notice of Assessment allegedly from the Government of Western Australia’s RevenueWA office of the Department of Finance. It looks legitimate. It contains a lot of my personal information, including the addresses of the properties I own, but because I’ve never received one of these before and you have talked a lot about scams and double-checking things whenever in doubt, I thought I’d run this one by you. Is this a scam or do I have to pay this tax?
Answer: All land in Western Australia is liable for Land Tax, an annual state tax that applies to land you own valued at over $300,000 and which goes to supporting the funding of the state government’s various initiatives. Land Tax exemptions apply, however, and currently your principal place of residence is generally exempt, as are some properties under construction and those used for primary production purposes, just to name a few.
Land Tax is calculated at midnight on the 30th of June each year and charged and paid for in advance, for the coming financial year. The owner of the land on the 30th of June is the person who is liable to pay the tax (in this case, you) and where multiple properties are owned by the same person, their combined values can be combined (or “aggregated”) for the assessment of the tax.
Despite the tax being calculated as at the 30th of June, Notices of Assessment are typically only issued between October and January, which is why you would be receiving a Notice now. It is charged on a sliding scale, beginning with a flat rate of $300 for unimproved property values of between $300,001 and $420,000 before increasing by a cents-per-dollar amount from there.
If the property you own is located within the Perth Metropolitan area, you might notice that a Metropolitan Region Improvement Tax (MRIT) is also payable and applies at a rate of $0.14 on every dollar of aggregated taxable land value of $300,001 and more.
Given that we know your non-principal place of residence properties have values that exceed the $300,000 threshold, the odds are good that the Notice of Assessment you received is legitimate and due and payable. For safety’s sake, however, and particularly if you received the notice via email, we advise you to confirm the amount due with the Department of Finance on (08) 9262 1200 before remitting payment.