Bicycle Network: Behaviour
Tax deductibility for cycling
Examples from around the world
People who drive cars to work get tax breaks. Some countries around the world think that people who use public transport or ride bicycles to work should also get tax breaks. We have outlined some of the proposals
Mar 04 The Chancellor has announced a generous tax exemption scheme, open to all employees, designed to ensure greater use of bikes to promote healthier journeys to work, and take action to reduce environmental pollution.
The scheme is offered through your employer and a participating retailer. Briefly, how it works is that employers offer their employees bike-buying loans. The bikes bought from the retailer attract VAT at 17.5 percent but this is claimed back by the employers.
The loan is deducted from the total salary before tax and national insurance contribution (NI), so is essentially tax and NI free. See Green Transport Plan link (right)
United States: Bicycle Commuter Act
2003 The Bicycle Commuter Act would extend the transportation fringe benefit in the tax code to bicycle commuters. The Bicycle Commuter Act would allow an employer to offer a monthly cash reimbursement to an employee who commutes to work by bicycle, providing a tax benefit to the employer and helping defray commuting expenses for the bicyclist.
The transportation fringe benefit was added to the tax code as part of TEA-21 as an incentive to get more people to use alternative modes of transportation for commuting. The goal was to reduce traffic congestion, pollution and wear and tear on the roads.
Under current law, an employer can offer an employee up to $100 a month for mass transit (subway, bus, train, van-pool, etc.) and up to $190 per month for parking, which is tax-free if the employer is making the purchase for the employee. The employer may also give a cash reimbursement for the same transportation, but a cash reimbursement is included as taxable income to the employee.
In either case, the employer is able to take a business deduction for the benefit. Another option allows an employer to permit an employee to take a tax-free payroll deduction for the purchase of transit tickets.
Participation is completely voluntary. A business is not required to offer the fringe benefit, nor is it required to offer the maximum amount. See League of American Bicyclists for more.
Australia - New South Wales
June 05 NSW Transport Minister John Watkins has called on the Commonwealth to investigate new tax concessions for public transport users.
While a range of "salary packaging" was available for car buyers, there were no similar incentives for using buses and trains, Mr Watkins said. He said the federal government's "cars-are-us" attitude would cost Sydney and the other capital cities dearly.
"Under the federal FBT (Fringe Benefit Tax) system, you can get generous tax breaks for buying or leasing a new car and paying for it from your pre-tax salary - often including fuel, insurance, parking and other costs in the savings package," Mr Watkins said in a statement.
"The more you drive that car, the more tax concessions you get. So why shouldn't regular public transport commuters get similar benefits from their purchase of bus, train or ferry tickets."
It was important the Commonwealth looked at the findings of two of their own major reports on the subject, he said. "The Australian Institute recently recommended a national focus on reducing dependency on private motor vehicles, combined with increased reliability and availability of public transport.
"And the 1999 Ralph Review Recommended FBT rules relating to transport be reformed as current arrangements include a perverse incentive to drive extra kilometres to get better tax breaks."
Mr Watkins said he'd raised the issue with Federal Transport Minister John Anderson and asked for it to be raised at the next Australian Transport Council Meeting.
NSW, which is spending $3 billion to improve public transport over the next two years, would investigate a number of plans and put forward a submission, he said.
Please see the Australian Tax Office website for the latest information.