Bicycle Network: Better Transport
- fbt, fringe benefit tax, subsidies, distortion
Bikes are increasingly regarded as a key component of better transport
Car rort bias axed
16 September 2013 - With the election of a Coalition government at the Federal election it seems the company tax car rort will continue. This is despite the considerable tax rebate savings that could be used by government to spend on "nation building" infrastructure and policies that would support a healthier and more financially secure future for Australians.
22 July 2013. Bike riders will no longer have to pay for the company car rort, which involved a Fringe Benefit Tax advantage biased against people on bikes.
The recently announced and implemented changes to company car fringe benefit tax reporting requirements will trigger some significant changes.
The removal of the FBT 'company car' rort means tax paying bicycle riders will no longer have to pay thousands of dollars a year to support people driving cars for personal use.The longer term effect should an increase in riding and improvement in public health.
Under the old rules people could claim 20% of cost of use of a "company car" even if they used it almost exclusively for personal use. This lead to people driving their cars further so they could maximise their tax savings and take home salary.
Bike riders without company cars were effectively subsidising those inside the scheme.
Economists refer to these "distortions" in the market when poor policy results in poor outcomes for society. One such distortion was this tax which subsidised private motor vehicle use.
From April next year, people with work provided vehicles will have to keep a log to prove that the kilometres they claim are in fact for business purposes.
The changes will remove the perverse incentive for people to drive their cars further to qualify for less tax and more take home pay. People inside the scheme got paid to drive to work and could claim a tax benefit on long interstate family holidays, for instance. June each year became known as "driving season" as people racked up long interstate trips to family to maximise their tax rebate.
Not only will the new rules help reduce unneeded driving, they will also reduce the incentive for people to buy or lease a new company car every few years.
From April next year, if the current Federal government is returned, the rort will be removed though taxpayers will continue to subsidise business use of cars.
Some are complaining about the loss, on average, of about $3,000 a year in tax rebate (for some it was up to $40,000 or more) but the changes make sense both economically and commonly. In fact "economists say the scrapping of the concession merely closes a long rorted loophole in the tax system, and will only affect those who don’t use their car for work purposes".
The last time fringe benefit taxes for 'work entertainment' expenses were changed there were outcries that the restaurant industry would shut down and millions would lose their jobs. This time around there are claims that the tax subsidised car industry will fail and salary packaging companies will close. Today there are fewer long boozy lunches and more sober and efficient afternoon workers.
This time it may be more people riding, less frivolous car driving and a healthier, more financially secure Australia. The taxpayer should also benefit from lower health treatment costs due to increased physical activity - a significant sum that could dwarf the tax savings.
Plenty of other market distortions remain, including fuel tax rebates and non-accounting of the costs of motor vehicle use, but the FBT changes remove one of the most blatant distortions. We support a move to a more level and fairer playing field for those pursuing healthier lives.
Quantifying Co2 Savings and Cycling
13 December 2011. When evaluating different transport modes, it is the bicycle that allows for important greenhouse gas emissions savings, according to the latest European Cyclists' Federation report. The report cites research that although not a carbon free mode of transport, the bicycle’s greenhouse gas emissions are over 10 times lower than those stemming from individual motorized transport.
How much Co2 is cycling saving?
What if Europeans cycled on average as much as the Danish?
According to the report "By 2020, if the EU cycling modal share was to reach in the same levels seen in Denmark in 2000, this would mean 481 billion of km cycled per year, and between 55 and 120 million tonnes of CO2e saved annually".
This would represent 5 to 11% of the overall target for EU GHG emissions (20% by 2020, compared to 1990 levels), and it would account for 57 to 125% of the transport target (10% by 2020 compared to 2005 levels)".
If EU cycling modal share was to reach the cycling modal share in Denmark by 2050, this would represent 490 billion kilometres per year, or savings between 63 and 142 million tonnes of CO2e per year, representing 12 to 26% of the target reduction set for the transport sector".
What about the Australian instance?
Transport generates 13% of Australia's greenhouse gas emissions, and is one of the largest sources of increasing emissions in Australia. Passenger cars make up about half of transport emissions. It is apparent that modal shift toward cycling in the Australian instance could help to achieve important greenhouse gas emissions savings, as has been demonstrated in the above mentioned European case.
See full report available here.