Yesterday the government’s Tax Working Group released their final report of recommendations for changing our tax system. While the media have fixated on the prospect of Capital Gains Tax, a quick skim through the report threw up something quite relevant to many of the discussions we have and is something we’ve suggested before too. Sitting under the title of Environmental and ecological outcomes and then Concessions we have:
- recommends that the Government consider allowing employers to subsidise public transport use by employees without incurring fringe benefit tax
This is expanded on a little bit further in the report.
Car parking and public transport
- The Group has also considered the treatment of car parks and public transport. At the moment, the provision of free car parking to employees is not subject to fringe benefit tax in many instances. Yet any contributions made to an employee’s public transport costs are taxed. This treatment has the perverse effect of discouraging the use of public transport.
- The Group acknowledges the practical difficulties involved in applying fringe benefit tax to employee car parks. In recognition of this constraint, the Group suggests the Government consider allowing employers to subsidise public transport use by employees without incurring fringe benefit tax.
It’s good to see the provision of free work carparking acknowledged as an issue. While there certainly will be some practical issues, there are also political as we learnt in 2013 when the former government suggested closing the loophole and quickly backed down after both business groups and unions joined forces to fight it.
So removing FBT from PT is really the least that could be done to help balance things back a bit and is something I’ve suggested before, most recently last year in response to concerns around fuel prices.
Perhaps one small thing they could do is to make it easier for employers to consider non-car based perks, such as subsidising public transport for employees.
I suspect many companies would at least be interested in the option of doing this but don’t after realising they’d not only need to pay the perk but also Fringe Benefit Tax on top of it. FBT is something they often don’t need to pay when offering carparks due to a loophole. The previous government did suggest closing the loophole but quickly backed down following opposition from both businesses and unions.
Removing FBT from PT would at least level that playing field and I suspect would have zero impact on the government because no company is currently doing it.
Taking it further, agencies like Auckland Transport could create special products to sell to businesses. This could consist of full travel passes, like monthly passes currently do, or alternatively, use the same functionality used for child/student concessions. In that situation, the employee might get discounted PT with AT billing the company for the difference. Both options could help to encourage more people to use PT which fits perfectly with goals for both Auckland and the Government.
Of course, this isn’t likely to be something that will benefit everyone. Public transport isn’t practical for a lot of people, especially those in rural areas but it’s one little thing that could help.
To me, removing FBT from public transport should be so easy and non-controversial that it should be among the first “cabs off the rank” for implementation. It also fits well with the goals in the Government Policy Statement about enabling more transport choice. In addition, I can see a lot of businesses being interested in such an idea, especially those looking to provide a point of difference in attracting staff and/or those with stated goals to improve sustainability and reduce carbon emissions.
What may draw fire is something I also mentioned at the time, that I’d go a step further and introduce a cash out law like exists in California. This would require employers who provide parking for staff to allow employees to have the value of that carpark cashed out.