FBT – Change of Position

An employee leaves working for a large chain as an area manager, takes a new position at an associated subsidiary being an area manager.

The employer’s ABN changes, but he rolls his AL, LSL, and SL to the new employer, as it’s the same parent company.

As part of the package at the large chain, he gets a salary packaged car under a Novated Lease.

He leaves the large chain and starts with the subsidiary the next day.

Upon leaving, he ceases the novated lease, trades in the old car, and gets a new one with the subsidiary.

In August, the salary packaging company advised him he had a $10,460 adjustment on his salary package to pay. The shortfall relates to the actual v estimated usage of the car. The running costs were $10,460 over his budgeted running costs.

Can he claim a deduction for the amount he has to pay for running costs for the motor car, i.e., the $10,460 subject to the logbook percentage?

Or is the documentation pointing to an employee contribution of $10,460 and not deductible?

Answer

If this amount represents a shortfall on a trade-in, it is before-tax dollars costed to the employee’s package.

As all expenses are borne by the employer, the taxpayer has not incurred an expense in earning assessable income.

We note that the statutory formula is being used in calculating the FBT liability.

As the cost is to his pre-tax salary package, he would be double-dipping if he claimed a tax deduction which, as we have stated, is not available in any case.  

While we don’t have the documentation,  we don’t see how a tax deduction can be claimed in these circumstances.