Features
22 Aug 18

Mobility: no impact on tax, limited impact on accounting

The 4 essential tax/accounting concepts in Australian fleet management are income tax, fringe benefit tax, goods & services tax (GST) and, popular topic today, IFRS.

Income Tax

A Deloitte study demonstrates that by 2021, in Europe, 63% of all cars will be on a corporate balance, be it a leasing company’s (or Fleet Management Organisation, as they’re called in ANZ) balance sheet or a corporate client’s balance sheet. This means that a majority of the users, in a very near future, will no longer own their vehicle. Australia is projected to move slower than Europe, but will eventually reach a similar ratio.

In a car sharing/pooling scenario, the new element would be that the user doesn’t take the car home or uses it for a limited time only, which means that the actual usage will need to be taken into account, both for corporate income tax and personal income tax. According to BDO Australia, this does not essentially change the tax perspective – if there is usage, there is tax. In case of mobility, this only means that usage needs to be measured, which explains the popularity of new apps and digital tools developed to measure exactly this.

Fringe Benefit Tax

This is the tax, or contribution, that the employees needs to pay for the personal usage of a car, regardless of the type of vehicle sourcing (purchase, lease, rent or novated lease). Generically, the tax can be calculated on a real usage basis (keeping a logbook) or on a pro-rated basis.

In case of mobility solutions, there’s a chance that the vehicle will be used for less than 3 months per year by the same employee, in which case FBT is not due. The tax authorities have been very strict regarding the private use of vehicles. Cases are know where tax people check cars, parked at soccer fields and verify whether the user is paying taxes on private use. As a general rule, people will have to declare any private usage above 2 kilometres a day. In case of mobility solutions paid for by the employer and used for private purposes, the calculation doesn’t change.

GST and ITCs

Goods and Services taxes will not be impacted by mobility solutions, nor for the supplier, nor for the client, at least for the first couple of years. Changes in GST rules take a long time to happen and mobility taxation is not on top of the Parliament’s agenda. As for ITCs (Indirect Tax Concession scheme), there’s no foreseeable change in legislation, meaning that tax deductibility for mobility solutions will follow the rules of other services delivered to corporates.

IFRS

When it comes to IFRS, there’s no essential difference between Australia and the rest of the world, the main issue being that a lease contract will essentially be split between the services and the asset. Nevertheless, BDO informs us that not only IFRS 16 on Leases is important, but also IFRS 9 (financial instruments) and IFRS 15 (Revenues from customer contracts).From a mobility supplier side, there’s a strong interaction between IFRS 15 and 16; IFRS 15 apply to “liabilities”, services to be delivered, which will play an essential role for mobility .

The information used for this article is retreived from the BDO presentation at Connector’s M15 Mobility Forum in Sydney, July 26th 2018

Authored by: Yves Helven