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Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015

Schedule 1 Modernising the car expense deduction rules

Part 1 Main amendments

Income Tax Assessment Act 1997

1  Subsection 28-25(1)

Repeal the subsection, substitute:

             (1)  To calculate your deduction using the “cents per kilometre” method, use this formula:

2  At the end of section 28-25

Add:

             (4)  For the purposes of subsection (1), the Commissioner may, by legislative instrument, determine rates of cents per kilometre for cars for an income year.

             (5)  In determining a rate, the Commissioner must have regard to the average operating costs for the cars to be covered by that rate.

Note:          Examples of operating costs include fixed costs such as registration, insurance and depreciation, and variable costs such as fuel and maintenance.

3  Subdivisions 28-D and 28-E

Repeal the Subdivisions.

Part 2 Other amendments

Fringe Benefits Tax Assessment Act 1986

4  Paragraph 19(1)(d)

Repeal the paragraph, substitute:

                     (d)  if:

                              (i)  paragraph (ca) does not apply; and

                             (ii)  the loan fringe benefit is a car loan benefit in respect of a car held by the recipient during a period (the holding period ) in the year of tax;

                            the recipient gives a declaration to the employer, before the declaration date and in a form approved by the Commissioner, that purports to set out:

                            (iii)  the holding period; and

                            (iv)  the number of whole business kilometres travelled by the car during the holding period; and

                             (v)  the number of whole kilometres travelled by the car during the holding period;

5  Subparagraph 19(1)(g)(ii)

Repeal the subparagraph.

6  Paragraph 19(1)(h)

Repeal the paragraph.

7  Subsections 19(3) and (4)

Repeal the subsections.

8  Paragraph 24(1)(f)

Repeal the paragraph, substitute:

                      (f)  if:

                              (i)  paragraph (ea) does not apply; and

                             (ii)  the expense payment fringe benefit is a car expense payment benefit in respect of a car held by the recipient during a period (the holding period ) in the year of tax;

                            the recipient gives a declaration to the employer, before the declaration date and in a form approved by the Commissioner, that purports to set out:

                            (iii)  the holding period; and

                            (iv)  the number of whole business kilometres travelled by the car during the holding period; and

                             (v)  the number of whole kilometres travelled by the car during the holding period;

9  Subparagraph 24(1)(j)(ii)

Repeal the subparagraph.

10  Paragraph 24(1)(k)

Repeal the paragraph.

11  Subsections 24(7) and (8)

Repeal the subsections.

12  Paragraph 44(1)(e)

Repeal the paragraph, substitute:

                     (e)  if:

                              (i)  paragraph (da) does not apply; and

                             (ii)  the property fringe benefit is a car property benefit in respect of a car held by the recipient during a period (the holding period ) in the year of tax;

                            the recipient gives a declaration to the employer, before the declaration date and in a form approved by the Commissioner, that purports to set out:

                            (iii)  the holding period; and

                            (iv)  the number of whole business kilometres travelled by the car during the holding period; and

                             (v)  the number of whole kilometres travelled by the car during the holding period;

13  Subparagraph 44(1)(h)(ii)

Repeal the subparagraph.

14  Paragraph 44(1)(j)

Repeal the paragraph.

15  Subsections 44(3) and (4)

Repeal the subsections.

16  Paragraph 52(1)(e)

Repeal the paragraph, substitute:

                     (e)  if:

                              (i)  paragraph (da) does not apply; and

                             (ii)  the fringe benefit is a car residual benefit in respect of a car held by the recipient during a period (the holding period ) in the year of tax;

                            the recipient gives a declaration to the employer, before the declaration date and in a form approved by the Commissioner, that purports to set out:

                            (iii)  the holding period; and

                            (iv)  the number of whole business kilometres travelled by the car during the holding period; and

                             (v)  the number of whole kilometres travelled by the car during the holding period;

17  Subparagraph 52(1)(h)(ii)

Repeal the subparagraph.

18  Paragraph 52(1)(j)

Repeal the paragraph.

19  Subsections 52(3) and (4)

Repeal the subsections.

20  Subsection 136(1) (definition of basic car rate )

Repeal the definition, substitute:

basic car rate , for a car for a year of tax ending on 31 March in a year, means the rate determined under subsection 28-25(4) of the Income Tax Assessment Act 1997 for the car for the year of income ending on 30 June in that year.

Income Tax Assessment Act 1997

21  Section 12-5 (table item headed “car expenses”)

Omit:

“one-third of actual expenses” method ..........................

Subdivision 28-E

22  Section 12-5 (table item headed “car expenses”)

Omit:

“12% of original value” method .......................................

Subdivision 28-D

23  Section 28-5

Repeal the section, substitute:

28-5   Map of this Division

24  Section 28-12

Omit “4 methods” (wherever occurring), substitute “2 methods”.

25  Subsection 28-12(2)

Omit “any of the methods”, substitute “either of the methods”.

26  Section 28-15

Repeal the section, substitute:

28-15   Choosing between the 2 methods

             (1)  Below is a diagram giving information about the 2 methods of calculating car expense deductions.

             (2)  The 2 methods give you the choice of which method best suits your situation and needs. For instance, one method may involve more paperwork than the other, but could give you bigger deductions.

 

27  Subsection 28-20(1)

Omit “any other method”, substitute “the other method”.

28  Subdivision 28-J (heading)

Repeal the heading, substitute:

Subdivision 28-J Situations where you cannot use, or do not need to use, one of the 2 methods

29  Section 28-160

Omit “any of the 4 methods”, substitute “either of the 2 methods”.

30  Subsections 28-165(1), 28-170(1) and (2), 28-175(1) and (2), and 28-180(2) and (3)

Omit “4 methods”, substitute “2 methods”.

31  Subsection 40-25(6)

Repeal the subsection.

32  Section 40-55

Repeal the section, substitute:

40-55   Use of the “cents per kilometre” car expense deduction method

                   You cannot deduct any amount for the decline in value of a * car for an income year if you use the “cents per kilometre” method for the car for that year.

Note:          See Subdivision 28-C for that method.

33  Paragraph 40-370(1)(c)

Repeal the paragraph, substitute:

                     (c)  you chose the “cents per kilometre” method in Subdivision 28-C for deducting your car expenses for the car for one or more other income years.

34  Subsection 40-370(1) (note 1)

Omit “or the “one-third of actual expenses” method”.

35  Subsection 40-370(1) (note 2)

Omit “or the “12% of original value” method”.

36  Subsections 40-370(3) and (4)

Repeal the subsections, substitute:

             (3)  In working out the * adjustable value for the income years for which you chose the “cents per kilometre method”, assume the decline in value was calculated under this Division on the same basis as those income years when that method did not apply.

             (4)  In working out the reduction in step 2 for the income years for which you chose the “cents per kilometre method”, assume that:

                     (a)  you had not chosen that method for the * car; and

                     (b)  Division 28 (about car expenses) had not applied to the car; and

                     (c)  20% was the extent of your use of the car for * taxable purposes.

37  Paragraph 41-10(3)(a)

Repeal the paragraph.

38  Subsection 900-70(1)

Omit “the “one-third of actual expenses” method or”.

39  Subsection 900-70(1)

Omit “Subdivision 28-E tells you about the “one-third of actual expenses” method and”.

40  Subsection 900-70(2)

Repeal the subsection.

41  Subsections 900-250(1) and (2)

Omit “4 methods”, substitute “2 methods”.

42  Subsection 900-250(4)

Repeal the subsection.

43  Subsection 995-1(1) (definition of business kilometres )

Omit “, 28-50, 28-75”.

44  Subsection 995-1(1)

Repeal the following definitions:

                     (a)  definition of car-less day ;

                     (b)  definition of full year car deduction .

Part 3 Application and transitional provisions

45  Application of amendments

(1)       Subject to subitems (2) and (3), the amendments made by this Schedule apply in relation to the 2015-16 income year and later income years.

(2)       The amendments of the Fringe Benefits Tax Assessment Act 1986 made by this Schedule apply in relation to the 2016-17 FBT year and later FBT years.

(3)       Despite the amendments of section 40-370 of the Income Tax Assessment Act 1997 made by this Schedule, that section continues to apply, in relation to a balancing adjustment event, as if those amendments had not been made if:

                     (a)  that balancing adjustment event occurs at or after the start of the 2015-16 income year for a car you held; and

                     (b)  you chose the “12% of original value” method in former Subdivision 28-D of that Act for deducting your car expenses for the car for one or more earlier income years.

46  Transitional—initial rate of cents per kilometre

Treat the Commissioner as having determined, under subsection 28-25(4) of the Income Tax Assessment Act 1997 (as inserted by this Schedule), the rate of 66 cents per kilometre for all cars for the 2015-16 income year.