Melissa Parke (Fremantle, Australian Labor Party) Share this | Hansard source

I rise to speak in support of this legislation and the provisions it makes in relation to the fringe benefit tax on employee vehicles and the tax amendments to the Rental Affordability Scheme. This reform is a small but significant part of the government's steady, thorough progress towards creating a sustainable energy future for Australia. That can only be achieved by ensuring that policy settings across the board provide incentives for energy efficiency in all areas of the Australian economy and of Australian life, and on the other hand, by removing what might otherwise have functioned as unnecessary incentives for inefficient energy use. This relatively small piece of tax reform achieves that by removing a tax calculation that had the effect of rewarding those who drive company vehicles more than they otherwise would. The amended approach will instead encourage a more conservative, energy efficient approach to car use for work purposes.

This is also an example of the government's willingness to reform the tax system in the interests of ensuring that the structure of tax assessments and concessions is actually working to achieve appropriate economic and wider policy outcomes. Where that is not the case and where there is a setting that forgoes revenue or makes a support payment that is unnecessary and ineffective, or even, as in this case, travelling in the wrong direction, it is absolutely right for government to say, 'We are going to make savings and we are going to apply government funds and concessions so that they work to achieve the positive reform that Australia needs right now and in the long term.'

Under the existing FBT regime, an employee issued with a company vehicle would be liable to pay fringe benefit tax according to one of two separate cost calculations: the operating cost method and the statutory formula method. The proposed changes will not affect the operating cost method of calculating FBT which still allows for the use of log books to maintain a record of personal and work related travel. This bill addresses inadequacies in the statutory formula method by removing factors that encourage higher vehicle usage and rep­lacing them with a single, fixed percentage fringe benefit tax calculation. Using the statutory formula method, an employee's fringe benefit tax liability is calculated using a sliding scale of cost per kilometre, with the cost declining as the number of kilometres travelled increases. The original rationale for this approach was based on the assumption that personal usage would remain static and that any additional travel would be work related. That assumption, however, no longer reflects the current state of vehicle usage data, which in fact indicate that the FBT calculation is having the general effect of increasing vehicle use irrespective of work related transport needs.

According to Australia's future tax system, commissioned by this government, the incentive in the current FBT arrangements for employees to use their vehicles more regularly in order to reduce their tax liability, is in turn leading to more road congestion and higher pollution, which of course increase carbon emissions and undermine the effort to address the causes of dangerous climate change. As I understand it, something like 80 per cent of all transport relies on petroleum based fuel. In making the transition to a more sustainable energy future, we must keep in mind that the range of renewable energy resources, while good for producing low or zero emission electricity, are generally not an appropriate replacement transport fuel. That is why we need to keep our focus on the energy demand side of the equation when it comes to transport and on the pursuit of energy efficiency in personal, business and particularly freight transport.

This bill helps to move Australia towards a more transport energy efficient future by removing a tax assessment calculation that has had the effect of encouraging people to use company supplied vehicles more than they otherwise would and for no additional social or economic purpose. Not only has it had the effect of rewarding what in many cases was unnecessary car use; in so doing, it has also inevitably dissuaded people from choosing to car-pool or to use more sustainable modes of transport such as trains, buses and bicycles.

The changes that this bill represents are eminently sensible. The bill reforms the FBT calculations as they apply to work vehicle use so that there is no unnecessary incentive in our tax system for excessive work vehicle use. It will also no doubt mean a reduction in single work vehicle use and a rise in the use of shared travel and public transport and, finally, it represents an important cost saving to government.

Other important measures in this bill include the tax law amendments to the National Rental Affordability Scheme. These amendments are designed to simplify the scheme and make it less restrictive, which will result in an increase in affordable rental housing available to Australian families. This change has even more significance at a time when families are struggling with record high rental rates, especially in Western Australia. For all these reasons, I support the bill and I commend the minister for his work in continuing the difficult but critical task of tax reform.

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