A Ghost from the past !

Kevin Rudd is proposing to tax company provided cars to prop up the government's bottom line when the carbon tax moves to an ETS.   To achieve that, those who have a company car will be required to keep a log book of all car movements for a period of time and log the purpose and length of each journey, thus establishing the ratio of business and private driving.

This was a plan implemented by a former Australian government several decades ago.  At that time, the log book period was six months, and at the expiry of that the business/private ratio so established - applied indefinitely.

Of course - it failed miserably !    Whenever the issue of money becomes a tussle between the creative minds of the business community and the bureaucracy trying to implement a control measure - dodging tax liabilities becomes a slam-dunk !

Some called it " creative accounting " !  For instance, should a business call be necessary in a distant suburb, on the return journey, a visit to a supermarket or any other type of store for a purchase would not fall into the " private journey " category.    A driver would have every right to book both the outward and inward drive as entirely " business " - and any other benefit would be ignored.

The government is hoping to gouge a $ 1400 tax from each of the 320,000 Australians who are provided with a company car as part of their renumeration. At present, the Fringe Benefits Tax ruling merely accepts that 80% of such vehicle benefits are " work related ".

This is a case of government thinking missing the point !   The bureaucratic mind simply sees a car as a benefit - to be taxed.   Industry sees a car an an integral part of a salary package to persuade a valuable employee to help the company expand it's profits.   In most cases,  provision of an up-market luxury car is seen as part of a " salary sacrifice ".   The " take home " pay is less - when a great car is thrown in as part of the deal.

If the government changes the rules, expect the incentives to attract the right people to take new directions.   Asking employees to provide their own vehicle - and paying a generous rate of compensation for each business kilometre driven - would allow the individual to choose a car of their choice - and surely accepting whatever an employee claims as " business " driving would be a matter between the employee and the company ?

This new tax proposal sounds good in theory.    Making it work is an entirely different matter - and when it comes to the bright minds of business engaging in war with the less than creative minds of the bureaucracy - that is usually a " no contest " !