Tax breaks for polluting activities

“Tax breaks for polluting activities should be slashed” according to the Australian Conservation Foundation (ACF) in a media release today. What a fascinating evolution of the increased environmental awareness in today’s society.

Here are a few more quotes from the media release:

“Treasury now estimates that, by 2009-10, we will be spending over $2 billion per year subsidising the use of company cars.”

ACF’s strategies director Charles Berger said:
“These tax breaks are economically senseless, reward environmentally destructive behaviour and increase taxes that the rest of us have to pay. There are much better uses for $2 billion than to hand it out to affluent corporate executives as an incentive to buy cars and drive them as much as possible to get the maximum tax benefit.”

Generally you need to be on the top marginal tax rate and driving at least 15,000kms per year to benefit from salary sacrificing a car in your remuneration package. At current marginal tax rates only people earning over $150,000 per year are on the top rate of 46.5% (including Medicare Levy), which is now a very small percentage of the population.

Plus the significant tax savings come when you drive over 25,000kms per year, so as the ACF claims there is an incentive to drive more to save tax. My anecdotal experience with clients reinforces that view.

What do you think? Should the new Australian Government scrap this concessional fringe benefit (tax break), as suggested by the ACF? Or do you think there remains a genuinely good reason for it to continue? After all if the tax break was scrapped that could mean an extra $2 billion per year available to invest in researching and developing renewable energy.

Let’s open a discussion by leaving your comment below…

Author: Matt Hern

Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.