FBT changes guide

Changes to Fringe Benefits Tax rules have slammed the brakes on new-car sales because they effectively double the tax on personal use.

The FBT on a $40,000 car that travels 25,000km a year used to be $7680 under the old system (which assumed 80 per cent of a leased vehicle’s use was for business and 20 per cent was personal).

But in reality most novated lease drivers rarely use their cars for work purposes. So under the changes the FBT would shift to 100 per cent which in this example sees the FBT increase to $14,209 each year.

Obviously car buyers aren’t going to pay this premium, so they will either keep the car they’ve got or buy a secondhand clunker -- and that will put the brakes on new-car sales.

Then there is the safety and emissions argument to consider. The average age of cars under novated lease is four years, which means they’ve got the latest safety technology and super-efficient engines.

The average age of all cars in Australia is 10 years, among the oldest in the developed world. Most new cars today have six airbags and stability control. Ten years ago you were lucky to get one airbag and anti-lock brakes.

This reporter is on Twitter: @JoshuaDowling