“A responsible Budget in uncertain times“
The Albanese Labor Government has handed down its first Federal Budget. Described as ‘a responsible Budget for uncertain times’, the focus is largely on easing the cost of living and investing for the future. Tax reforms announced in the Budget are largely restricted to multinational tax measures. The Government will also provide additional funding to the ATO for increase compliance activities in personal income taxation, business tax risks and combating the shadow economy.
This article highlights the key measures that are relevant for the not-for-profit (NFP) sector.
NFP businesses – Certain electric vehicles exempt from FBT
The Government has reiterated its commitment to exempt from Fringe Benefits Tax (FBT) certain electric vehicles commencing from 1 July 2022.
The FBT exemption will apply to battery, hydrogen fuel cell and plug-in hybrid electric cars that have their first retail price below the luxury car tax threshold for fuel efficient cars (for the 2022/23 financial year that threshold is $84,916). Additionally, the car must not have been held or used before 1 July 2022.
Employers will also be required to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.
The FBT exemption will apply only to electric vehicles that qualify as ‘cars’ for FBT purposes. Accordingly electric vehicles that are designed to carry one tonne or more, or nine passengers or more are excluded from the exemption.
The Government has indicated that this measure will be reviewed after three years.
This measure was previously announced as part of the Government’s election commitment and is contained in Treasury Laws Amendment (Electric Car Discount) Bill 2022 – which is currently before the Senate. Further information about this measure can be found in our previous article.
Car parking benefits – status update
In a previous article we highlighted the uncertainty regarding the FBT treatment of car parking benefits in view of judicial developments, and the previous government’s announcement on 29 March 2022 that it would consult on redressing the adverse FBT implications.
The current government has not indicated whether it will progress with the public consultation announced by the Morrison Government.
It was previously understood that car parks that effectively charged penalty rates for all-day parking (to encourage shorter stays) do not represent genuine alternative parking arrangements for commuters, and so should not trigger FBT liabilities. Recent court decisions have changed this understanding. The ATO has also revised its view in Taxation Ruling TR 2021/2 on the meaning of the term ‘commercial car parking station’. The effect is that car parking facilities with a primary purpose other than the provision of all-day parking such as parking facilities in hospitals, shopping centres, hotels, airports, etc., constitute ‘commercial parking stations’.
The ruling applies in respect of car parking benefits provided on or after 1 April 2022.
The broad inclusion of shopping centre car parks and the like within the concept of what is a commercial car park for FBT purposes means affected employers will have an increased FBT liability, or be subject to FBT on car parking benefits for the first time. Pending action from the Labor Government, it may be prudent for those who are impacted by TR 2021/2 to start planning (here is a TaxEd article that may assist members who are impacted by the change in approach in mitigating their FBT liability).
Individuals
From a personal income tax perspective the Budget did not announce any changes to the former government legislated Stage 3 tax cuts that are due to take effect from 1 July 2024. At this stage it appears that the tax cut is likely to proceed, in which case, the 37% marginal rate of tax will be abolished and the 32.5% rate reduces to 30%.
Where to access Budget documents
The 2022-23 Budget Paper are available at Budget October 2022-23. A summary of the Budget paper is accessible via our website, under member resources.
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