Changes to the fringe benefits tax arrangements for cars are good news for public health, says public health expert Professor Chris Rissel, from the Sydney School of Public Health at the University of Sydney. But we could also be taking a lesson from some overseas initiatives, he suggests.
Transport policy is a public health issue
Chris Rissel writes:
The change of car fringe benefits tax rules to a single flat rate of 20 per cent is a move welcomed by all stakeholders, including health groups, small business and car companies.
It removes the unintended incentive for people to drive their vehicle further than they need to, in order to obtain a larger tax concession. Any FBT was determined on the total distance travelled, regardless of whether it was for business or personal use.
Previously the tax on company car use was linked to distance driven, with 26% FBT liability for less than 15,000 km driven, 20% for 15,000-24,999km driven, 11% for 25,000-40,000km and 7% for over 40,000km travelled.
The tax is calculated based on the value of the vehicle multiplied by the statutory fraction (eg, .26 if under 15,000km) and then takes into account the number of days in the year the car was available.
While $954 million will be saved over five years, could there have been a better outcome?
Having lots of cars driven less is definitely a good result.
Clearly more money could have been saved if the rate was higher, and the true cost to society of motor vehicle pollution, road damage and trauma was considered. The 20 per cent rate seems like it may have been a compromise to get all parties to support it.
However, other tax measures to encourage alternatives to driving (to achieve the range of health benefits that come from active transport) were not considered.
For example, both the US and UK have tax based incentives for people who cycle to work. A favourable tax treatment has been shown to provide a significant stimulus to riding to work rates.
The UK HM Revenue & Customs department has allowed an exemption to employers for the specific purpose of a ride to work scheme and this has now been operational for a few years. It has been shown to have impacted participation rates for transport cycling, and a range of positive outcomes.