ETS bring forward to be partly funded by abolition of FBT statutory formula method for company cars

The Prime Minister and the Treasurer have today formally announced that the Government will bring forward the start date of emissions trading to 1 July 2014. From that date, a floating price on carbon will apply. Under the previous arrangements, the carbon price was to be $25.40 per tonne from 1 July 2015. Under a floating price, the figure is expected to be around $6 a tonne. Government assistance to emissions-intensive trade-exposed industries will continue unchanged.

The PM said this will cost the budget around $3.8bn over the next 4 years. The Government said it will make up for the lost revenue through savings, including $1.8bn from changes to FBT arrangements relating to employer-provided cars. The Government proposes to remove the statutory formula method for both salary-sacrificed and employer-provided car fringe benefits for new contracts entered into after Tuesday 16 July 2013, with effect from 1 April 2014. Existing contracts materially varied after 16 July 2013 will also fall under the new arrangements. Existing contracts that are not varied will continue to have access to the existing statutory rate throughout the contract.

All car fringe benefits for new leases will be calculated using the operating cost method from 1 April 2014. People who use their vehicle for work-related travel will still be able to use a log book to ensure their car fringe benefit excludes any business use.

There will be no change to the Household Assistance Package. The Government said households and pensioners will continue to receive payments calculated on a higher carbon price. These benefits are permanent.