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Tax and Cycling - A Weird Mix?

June 15, 2015

Quite often in the world of cycling and all4cycling, we limit our thinking to products and services, competition and races, our latest product vending machines and bicycle repair installations.

But as with most businesses (and sport), the world of politics is something that remains at the back of our minds, and every now and then shines through with a multitude of implications for both the business and the world of cycling.

On June 1st, submissions closed for review in regards to the Federal Government’s Tax White Paper. Sounds important, but what is it? Australia is in the process of reviewing its current tax system. Roughly, it’s all about tax incentives, allowances and exemptions for those employers and employees who utilise cycling as a means of transport to and from work.

With this mind, the voices behind the cycling businesses of Australia began lobbying on behalf. These voices were Bicycle industries Australia (BIA) and the Cycling Promotion Fund (CPF). With the submission deadline of June 1st, BIA and CPF made a number of submissions as a single entity and with bicycle organisations around Australia.

There were four key submissions that they made focusing in creating a greater playing field between bricks and mortar shopping vs. online (international shopping). We’ll summarise these next.


Submission One: Reduce the LVT
In terms of reference to the cycling industry the first submission focused around the Low Value Import Threshold (LVT) and the identification of tax issues that affect the sale and use of bicycles in Australia.

But what is the LVT? In terms of the Low Value Threshold (LVT), what this means is that imports valued at less than $1,000 are exempt from a ‘number of Commonwealth requirements. One of these exemptions is that goods below $1,000 in value are generally not subject to the goods and services tax (GST).’[1]

“This LVT exemption enables international retailers to sell to Australian consumers without charging GST. This can contribute to a price differential between goods sold by Australian retailers and by international retailers, which can be a significant factor in consumer choices. To the extent that the LVT influences consumer choices (and thus reduces the impact of underlying market factors), it distorts competition between Australian and international retailers.”[2]

For Australian businesses selling cycling wares, you can see that international online vendors are at a significant advantage without having to price with GST in mind – especially with the majority of purchases falling below the $1,000 threshold.

The BIA's first submission focused upon reducing the LVT and therefore eliminating the competitive advantage of international online stores and their susceptibility to exemption of GST on purchases of less than $1,000.

By reducing the LVT, the decision to purchase off shore vs. an Australian supplier is of greater parity as GST exemption is minimised.


Submission Two: Ride to Work Bicycle Purchase Incentive Scheme
The CPF submission focused on the creation of a scheme that would see employees have the ability to “salary sacrifice the cost of a bicycle and safety equipment, such as a helmet and lights, up to a capped value of $1,500 without incurring a taxable benefit.”

With this incentive scheme in place, CPF estimate that based on UK numbers, Australian cycling businesses could see the benefits of a 22% increase in bicycle sales per annum – that an additional 100,000 bicycles on our roads.


Submission Three: 4 Future Programmes
The third submission was a group submission where not less than nine national and state cycling organisations jointly worked together to carry on the focus of the momentum of Australian Bicycle Summit.

It identified four potential future programmes for review.

1. Ride to Work Bicycle Purchase Incentive Scheme
This programme focused on that of the earlier submission of the CPF – a salary sacrifice of the cost of a bicycle and safety equipment, such as a helmet and lights, up to a capped value of $1,500 without incurring a taxable benefit.

2. Accelerated Depreciation for End of Trip Facilities
This tax incentive focused on having the ability of “accelerated depreciation of investments in expanding, improving or retro-fitting bicycle parking, shower and change facilities and other specific infrastructure that supports increased travel to work by active modes – walking and cycling.”

This is a significant programme in the eyes of all4cycling and its partner businesses that work within the area of End of Trip Facilities.

3. Tax-free mileage allowance
An interesting programme, the tax-free mileage allowance is focused on an employer tax refund that is linked to every kilometre an employee rides to work. In exchange, the employer provides an employee with a tax-free fixed allowance to commute to work by bike.

While this does seem like an interesting, difficult to implement and somewhat controversial scheme, it is based off a similar scheme operational in Belgium – where employees are paid 0.21 Euro per kilometer, with a daily allowance of 15km (daily payment total of €3.15 Euro). In a year, for the employee, this is approximately an additional €780.00 that is non-taxable. And not to mention the physical and mental benefits to the individuals and subsequent increases in productivity to the employer.

4. Health Benefits
In line with the health benefits above, the CPF partnered with the National Heart Foundation to deliver the fourth submission that had a greater focus on the health benefits of cycling to and from work through tax incentives.


For a more in depth review of the submissions made, you can access here. Did the CPF and AIB get it right? Is there something else that could have been focused upon in regards to the tax review? Leave your thoughts in a comment below.

[1] http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1415/OnlineShop

[2] http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1415/OnlineShop


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