Cars stack up as tax changes start to bite

CARS have started stacking up at new-car dealerships as buyers walk away from leases in the wake of this week’s changes to fringe benefits tax laws.

David Purchase, the executive director of the Victorian Automotive Chamber of Commerce, said today the industry was facing a return to the credit crunch of 2008, when cars were left idle in their tens of thousands as buyers fled the market.

“We know of one member, with multiple dealership franchises in Victoria which normally sells between 120 to 150 cars a month as leased or company cars,” Mr Purchase said today.

“Customers have put a stop on these sales until further notice, resulting in some employees being surplus to requirements.

“While sales have stopped, stock keeps arriving from orders placed months in advance.

“The dealership will soon become overstocked with cancelled back orders and the arrival, and storage, of new vehicles,” Mr Purchase said.

“If swift action is not taken, this could be as big an issue as the floor plan credit crisis in 2008.” GoAuto believes crisis talks were held yesterday between Toyota dealers and several novated leasing companies affected by this week’s change to fringe benefit tax laws that have the potential to affect up to a third of new-car sales.

The change removes an automatic assumption that 20 per cent of a leased or salary-sacrificed car’s use was for personal purposes, and will now mean as many as 320,000 owners will have a higher tax bill.

The government says the change will tip $1.8 billion into a $3.8 billion black hole in the federal budget due to an early adoption of a cheaper floating carbon tax based on world, rather than Australian, prices.

Yesterday, treasurer Chris Bowen labelled claims that the changes to the tax laws would cause massive damage to the Australian car industry as “alarmist and irresponsible”.

“Even putting aside the context of the changes to carbon pricing, the FBT decision is good tax policy.

“It protects the tax base for the vast majority of Australians who do not benefit from the salary packaging arrangements,” he said.

South Australian premier Jay Weatherill today travelled to Melbourne to speak with car industry representatives about the impact of the changes.

“SA component suppliers rely heavily on Toyota,” he posted on social media late today.

“Very positive meeting in Melbourne re Toyota's plan for the future.”