Carbon tax: Car industry raises hackles over reform

UPDATED
22/07/2013AUSTRALIA’s car industry has reacted angrily to sweeping changes to the way business cars are taxed.

Industry advisers, lobby groups and social media all came alive yesterday questioning the outcome of changes that will help to fill a $3.8 billion hole in the federal budget following the proposed axing of the fixed-price carbon tax, announced yesterday.

Brett Fowler, a director at accountancy and business advisers Moore Stephens Automotive, said in an industry advisory distributed today that the statutory formula method of calculating fringe benefits tax on cars was originally introduced to reduce the administrative burden to employers and employees.

“Without this method being available, there will be a significant increase in administration which will discourage many potential salary-sacrificed vehicle options,” Mr Fowler wrote.

“This will most likely impact sales of new vehicles, particularly fleet arrangements.

“A further impact on the industry which remains unclear from the announcement, is whether the existing ruling governing fringe benefits tax calculations for vehicles supplied to employees of retail automotive dealers ... will remain in play.

“This ruling adopts the statutory formula method and it would therefore seem to be at risk of future application,” he said.

A separate advisory issued today by FleetPartners questioned how customers would have to deal with end-of-lease options where the original lease was extended, or the car was refinanced.

“Either of these transactions may amount to a 'material change' that would mean should the proposed legislation become law, the tax implications of the proposed changes would be backdated to July 16, 2013,” it said.

The novated lease industry has already begun shedding staff in the wake of the tax changes, with predictions of up to 2000 jobs to be lost across the industry before the end of the month.

Among those to take immediate action last week, Melbourne-based NLC Leasing was forced to sack 74 workers – around half its workforce – as a direct result of government’s announcement, while Selectus Salary Packaging said it would cut at least 100 jobs.

In a statement, Selectus CEO Paul King said: “Kevin Rudd is the issue here with a return to midnight decision making and complete lack of industry consultation.

“The announcement puts at immediate risk the employment of a significant proportion of our organisation with wide ranging impacts on the salary packaging industry alone – estimates are 2000 job losses by the end of this month and up to 20,000 by Christmas.

“This does not take into account the further losses that will come from the broader automotive sector.”

The company added it “wants to make clear that the misconceptions being promulgated by the government that the majority of vehicles are for high flyers and BMW drivers”.

“The average salary of our customers who use this benefit is $71,000 – far removed from the executive salaries suggested by the government, and the average vehicle value is less than $30,000. A significant proportion of our client base are teachers, nurses, and public servants, not executives.”

The Victorian Automotive Chamber of Commerce said it was “very concerned” that the changes to the fringe benefits tax would result in fewer new-car sales and more red tape for small businesses.

“Only last month, the repair, service and retail sector of the automotive industry called for more consultation and recognition from the government,” VACC executive director David Purchase said.

“A few days later, the Labor Party changed leadership, but clearly has not changed its attitude towards the automotive industry.

“Labor has introduced a new policy, which will have a significant impact on the automotive industry, without consulting us,” Mr Purchase said.

“Not for the first time, VACC members and members of the automotive industry are grappling for information and trying to second-guess the changes they’ll have to make.”

A source who did not want to be identified said the changes were likely to significantly harm the car industry.

“It will kill the car industry,” the source said. “There will be a massive change to all company cars with businesses now giving car allowances rather than company cars/salary packaging.”“It’s turning it into a class war,” said another.

Social media exploded with reactions from the car industry’s coalface.

“Went to work to see people cancelling lease vehicle orders as fast as they can. Well done (Kevin Rudd) – hit the vehicle industry again,” one Twitter post said.

“Seems like Ford made the right decision in Australia after all, since Labor's inspired answer to one tax is to add another,” said another.

Yet others told Holden that plans to buy cars had been placed on hold.

“I was going to buy the new VF Commodore on novated lease – now I won’t be because of Kevin Rudd,” one user said.

“Was planning to buy a new Holden Commodore but FBT changes have stopped that.

Be keeping the old Sube ‘til it falls apart now,” revealed another.