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Hundreds of jobs will be lost across the country as a direct result of the Federal Government’s changes to fringe benefits tax (FBT) rules.

Melbourne-based salary packaging business NLC last night confirmed the changes had left it with no option but to make 74 of its 143 staff redundant, while fellow Victorian operation Selectus told ABC News it would be forced to cut up to 100 of its 140 employees if there was no change in the government’s stance in the coming days.

On Tuesday, Prime Minister Kevin Rudd and Treasurer Chris Bowen announced a $1.8 billion cut in FBT concessions for salary-sacrificed and employer-provided vehicles as part of its plan to help cover the $3.8 billion switch from a fixed to a floating carbon price.

The changes force workers with salary-sacrificed and employer-provided cars to use a logbook to keep detailed records of the personal and business use of their vehicles in order to claim FBT concessions, and drew instant and widespread criticism from leading industry and local manufacturing figures who claim the changes will hammer new vehicle sales.

mazda-bt-50

Victorian Premier Denis Napthine said the “ill-conceived and precipitous” policy change would affect more than 300,000 Australians who leased vehicles and claimed FBT concessions, and predicted local car makers could take a hit of up to 10,000 sales per year.

“This would represent an unwelcome blow at the worst possible time to the local car manufacturing industry,” Napthine said.

“The Federal Labor Government must review these ill-considered tax policy changes that will prejudice jobs and investment in our local car industry.

“We urge that if the Federal Labor Government is not prepared to abandon this policy, it should at least consider reviewing the scope of the new application of the tax to exempt locally-produced cars.”

Holden spokeswoman Andrea Matthews said the changes would have a “significant impact” on its business, the scope of which it was yet to fully determine.

“We did do an initial assessment earlier in the week and that initial assessment did indicate that it is going to have a significant impact on our business,” Matthews said.

“We don’t know the size of that impact yet in terms of sales of new Holdens, we’re just working through that at the moment.”

Matthews admitted Holden had not met with the government since Tuesday’s announcement, but said it enjoyed an ongoing dialogue with both major political parties and insisted it planned to respond through the Federal Chamber of Automotive Industries (FCAI).

“We have ongoing conversations with both sides of politics and none of that has changed,” she said.

“We did make a statement earlier in the week that we support the FCAI’s position where they’re requesting the government to reconsider the decision on the policy, and that stands, we would be keen for the government to relook at that.”

holden-cruze

Last night, Labor Senator for NSW and parliamentary secretary in the Rudd ministry Doug Cameron criticised the industry’s fierce reaction to FBT changes.

“The car industry has no right to argue they should survive off the back of people making unsubstantiated claims on taxpayers,” Cameron told AAP.

“The car companies are crying wolf.”

Victorian Automobile Chamber of Commerce executive director David Purchase said new car dealers would suffer the most from the government’s policy changes.

“They are telling us that, already, orders have been cancelled, settlements suspended and deliveries to customers postponed,” Purchase said.

“We know of one member, with multiple dealership franchises in Victoria which normally sells between 120-150 cars a month as leased or company cars. 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.

“If swift action is not taken, this could be as big an issue as the floor plan credit crisis in 2008.

“We call on the Federal Government to reverse its decision. If changes to FBT are desired, there should be consultation with all sectors of the automotive industry, and new car dealers, in particular. The retail, service and repair sector of the automotive industry is significant and should not be ignored.”


  • Brayden Cresswell

    To much of a good thing for the dealers will stop it seems I can’t see a issue with log books I always kept a record when I was a sales rep using my own car it’s pure laziness to argue otherwise takes 3 minutes of your time to jot down some numbers and location.

  • peddy.d

    I wrote an email to Senator Kim Carr yesterday about the changes to the FBT, I wrote that they should at least keep the statutory method for locally made cars or even make the FBT exempt for locally made cars purchased under salary packaging and company fleets. It would make purchases of locally made cars more comparably affordable to foreign made cars and might reduce the need to increase subsidies to the local manufacturers beyond current levels. I say if they’re going to do this they should at least help the local 2 while they’re at it.

    • Andy

      Not that I disagree, but isn’t this just protectionism for Australian built cars? We’ve just spent 2 decades lowering tariffs and now we have to turn around and achieve the same type of protection by subsidising Australian built cars?
      There were many good arguments against tariffs (ie cost to taxpayers, less efficient/competitive Aust industry due to protection from O/S competition) that would also apply here. And if we have an industry that can only ever survive with taxpayer subsidies, is it an industry worth keeping?

      • JD

        Name one car manufacturer that does not receive any government assistance. We as tax payers pay less per capita to our auto industry than other countries in the world to their auto industries.

        What really irks me is seeing non locally made cars used by council and other gov departments. There is no reason why an i30 should be used by the council than a Cruze, or hybrid camry for that matter.

    • JD

      Brilliant idea. Making the best of a bad situation.

    • Guest

      I totally agree with you. The steady decline of the FBT concessions have been terrible for the local car industry. What the government doesn’t get is that people will find another way to avoid this tax even if it means not buying a new car. There will be no increase in revenue for the government, just a loss of jobs.

      • $29896495

        Businesses won’t stop buying cars. What are they going to do walk? Hardly. If the purchase of cars this way stops no loss. People that need a car for work will buy one new or second hand. Then the business will pay running costs as a Telstra business did when I worked there. They’ll shuffle the money a different way. It’s the way of the world.

    • Sydlocal

      As well as this the Government (federal, state and local) should always default to a locally made car unless there isn’t one suitable for the task required.

    • Jacob

      That would be against the Free Trade Agreements.

      • Godot

        Jacob, you’ve got it in one. To make local cars exempt from the FBT and not apply the same to imports would be against World Trade Organisation rules. So, rather than fix the actual problem through encouraging sales of locally made cars by helping to make them cheaper to consumers, the government opted to compensate the local car makers to the tune of $200 million.

        Just to qualify my statements a little, if the government did actually offer the local car makers an exemption, they would only up the price by the difference and cream it off that way. But who could blame them for wanting to make a buck in such a lousy, cut-throat industry. Pushing all of us, including car makers, inch by inch towards dependency on the welfare state is the insane end result of free trade.

  • Jonno

    It’s a politically expedient solution to the carbon tax changes from a fixed to floating carbon price. Many voters would be politically neutral on the FBT changes either being totally out of it or having no part of it in their daily lives. It only affects a small part of the voting electorate & a tax benefit that favours the better-off. The tax savings would benefit more people at the expense of a minority who are already well-off. The redundancies of the salary packaging businesses and new vehicle dealers are just unfortunate circumstances of an industry thriving on a frivolous tax benefit (drafted in better economic times) that favours a well-heeled minority at the expense of the broader majority who need help with their cost of living in today’s difficult economic environment.

    It is a politically astute move by Kevin Rudd to bring forward the carbon change move forward & removing certain inequitable tax benfits. Anyway, the local auto industry is already in a downward shift from 3 to 2 manufacturers left & with petrol currently at A$1.63 per litre – there is little sense in supporting what is a sunset industry. We love cars at the Caradvice forum but we should also be aware of the shifting sands of time, that as much as we love automobilies, there is a time that it will come to pass!

    • Job

      Good idea, lets just give up on the local auto industry.
      Other countries with higher costs of living and wages seem to be able to do it but Australia? No lets just give up and work in some other boring industry.
      Petrol at $1.63 a liter? Big deal buy more V8′s.
      There’s a waiting list for V8 commodores, who would have thought?

      • Sumpguard

        That’s not what he is suggesting at all. Just your interpretation.
        “IF” GM allow holden to widen the export market there is no reason why they can’t survive. Especially as our dollar is sliding.

      • Jacob

        higher costs of living than Australia? which country would that be?

        Aussies now think its normal to pay $400k for a tiny apartment.

    • Sydlocal

      I didn’t know teachers, police officers/emergency service workers, every day members of the defence forces, charity workers etc are well off/well-heeled. There you go, you learn something new every day. Maybe I am in the wrong line of work…

      • $29896495

        The end result if this comes in is they have fill out log book, which in theory would mean more people have to be employed to do the paperwork. What’s wrong with that?

      • cv

        Plus if teachers, police officers/emergency service workers, every day members of the defence forces, charity workers etc are using their car for work purposes they wont be impacted at all.

      • about time

        Why does a teacher need a company car ? That what a novated lease is for Business use?

        • $29896495

          Good point, I don’t know of any teachers getting company cars as a package, or ambulance drivers, or police or army or airforce or navy (or do you include ships?) Charity?? Vinnies?

          • Sydlocal

            Defence personnel, teachers etc salary sacrifice cars. I know a few people from those jobs etc who SS their car.

      • Phil

        Police, emergency services, nurses etc earn decent money. But do they deserve the privilege of getting an extra $9,000 a year exempt of income tax, which does not pay FBT either? Everything has a cost, and there is a cost to the community in allowing these workers access to additional tax free benefits the rest of the community is denied. Do you think it’s fair that a landscaper who does physical work all day long gets $18k tax free threshold, while his neighbour who works as a nurse gets $27k thanks to the salary sacrifice and FBT allowance?

        Don’t forget that these salary sacrifice arrangements provide a benefit equivalent to the amount of wages that are substituted, and therefore should be taxed as equivalent to wages.

        • Sydlocal

          I am not saying I agree or disagree with it (you do have some very valid points that I agree with), more the point that not all people who salary package cars are ‘well off/well heeled’, as Jonno mentioned. Plus you must be joking if you think all of those people earn decent money. They get no where near enough considering the job they do with some of them below the national average.

          In fact there would be quite a few of those labourer jobs that would actually get paid more than some of those emergency service/police/defence personnel. For example there are many personnel in defence who get paid a lot less than a civilian who does the same kind of work. In some cases a civilian equivalent gets paid close to twice as much with less qualifications, even when taking into consideration some of the subsidies defence personnel receive.

          Also are you saying that people in some of those jobs don’t do physical work all day long? I am sure there would be some nurses/defence personnel etc who would take offence to that comment. Not to mention landscapers etc don’t get abused/vomited on/urinated on etc etc like nurses can and often do. Another example, Defence personnel can work every single day for weeks/months at a time away from their families etc without a single day off, no paid overtime (however they do get allowances depending on what they are doing. Not all of the allowances are that good eg in country work) and working 12-16+ hour days at random times day or night in all kinds of weather conditions etc. Don’t you think it is fair they at least get something to compensate them for the personal sacrifices they make?

          • Phil

            no, what I am saying is giving tax exemptions to some people and not others is not the way to renumerate them. In fact, the benefit is still only available to those who can afford it. I could have used the example of a nurse with a tradesman husband earning good money who can afford the salary sacrifice, while another nurse earning the same money might be a single parent who can’t afford to salary sacrifice a car, and pays more income tax as a result. By all means pay people relative to the work they do, but don’t give one group a tax advantage over others on equal income simply because they happen to work in a highly unionised public sector job, or for a public charity.

          • Sydlocal

            Defence highly unionised? That is a good one!!!! I don’t know if they would fit the profile of a public charity either. No argument about nurses/teachers though.

  • Dave W

    Oh noes!! Now I can’t afford that Porsche 911 I’ve just ordered!! What am I gonna do?

    • About time

      Missed by a mile 911 on a novated lease would never work from a Tax Benefit point of view

      • Dave W

        Fine!! Make it a Porsche Panamera then. It’s a company car for picking up my upper class clients from the airport and take them to the casino for a corporate lunch at one of the 3 hat restaurants then off to the gentlemen’s club for a bit of evening fun.

        Of course being part of my work, I’d be able to claim tax on all that expenses as part of my company’s operating cost.

        • Clive D

          I seriously don’t think you have a solitary clue about how the real world works Dave W. Deductions on such frivolous expenditures went out a long time ago. I set up a business 6 years ago, and I probably thought there were some perks available. I can assure you that with Fringe Benefits Tax as soon as my business spends money on entertainment, alcohol, lunches etc much of it is equivalent to me spending it out of my very own personal after tax budget. Perhaps you’ve never had to submit an FBT return.

          Perhaps you have a chip on your shoulder about your place in the world and everyone seems to be having a better time. Because you dont know how it really works for business owners.

          There are valid reasons for taking away this particular perk over time. Certainly a debateable issue.

          What is outrageous is that perfectly hard working business owners and their employees have been dealt a hammer blow overnight. And the government’s line is that this is a rort that has to go. No-one was rorting the system. My accountant made it clear to me that the novated lease was the safest, completely legitimate, ATO- approved, compliant way of getting a tax break on my car with no paperwork needed. So I took it. If my business use is fairly minor, am i rorting the system? No – I’m taking careful and ethical financial planning advice and making sure I do nothing wrong.

          Sure take away the gift but to decimate the system in a single day is terribly wrong

          • Dave W

            I got a 70+ grand car in the garage that says otherwise. :)

            The lunches I’ve had at Darling Harbour restaurants and the evenings spent at Men’s Gallery courtesy of a corporate credit card also says otherwise.

            You get a tax break on a car that is mostly for personal use and you think you’re not rorting the system just because you use it occasionally for work? lol

          • Clive D

            If you are spending money on corporate card at Mens Gallery your company or the company you work for, incurs an FBT charge. Congratulations if you think thats not the case. And enjoy yourself

          • Sumpguard

            “My accountant made it clear to me that the novated lease was the safest, completely legitimate, ATO- approved, compliant way of getting a tax break on my car with no paperwork needed.”

            That doesn’t make it right. it’s a law that needed tightening to stop it being exploited at the expense of tax payers.

          • Clive D

            Crumbs. I am so sorry for my morals. I painstakingly meet all my compliance and proactively correspond with ATO and OSR on all my obligations. My accountant advises me the best way to handle the purchase of my car in order to satisfy the ATO is to take a novated lease, because the ATO has indicated this is is OK.

            And I am morally wrong! Thats a tough call.

            The ATO decided this was OK. They allowed it. A tax break.

          • Dave W

            And now they realised they’re bleeding dollars through FBT and want to close that hole just as they closed the hole on frivolous spending. What’s wrong with that?

          • Clive D

            Hi Dave W. firstly – thank you for your graciousness! Having vigorously suggested that alcohol-fuelled visits to Mens Gallery are supported as tax deductions when in fact they incur the FBT, you now acknowledge that the ATO has indeed closed the hole on frivolous spending. I commend you for your weekend research and not being afraid to acknowledge your mistake.

            On your question “What’s wrong with that?” …where you are referring to the ATO closing the hole on the novated lease…

            I don’t think we are that far apart. I acknowledge the fact that its a perk for drivers that don’t have business usage. i acknowledge it’s something that is open to debate and should perhaps be removed. I just object to …

            a) the insane overnight way in which it has been done

            b) the suggestion that people are rorting the system when their decent accountants and financial planners have advised them it is all above aboard with the tax office. It’s almost the equivalent of Tax Office GUIDANCE. The people that will rort the system are those who cram as much ‘business mileage’ into a 12 week period as possible to pretend a certain percentage that will last them 5 years. Expect to see traffic on the Federal Highway from Sydney to Canberra over the next few months.

            c) the suggestion by Albanese that its a fatcat BMW luxury car driver perk when it is clearly not so

            Most of all I feel sorry for hardworking business people and their employees whose world is taken away from them in an instant

            And finally, whether or not the perk should be here to stay, the industry value-chain has evolved with a built in expectation of the FBT allowance. Its pretty farcical for the government to waste $2b over the past decade giving handouts to Holden alone….and then for the purpose of a swift political announcement – do a policy announcement that can quite obviously cause such immediate damage to the industry. Talk about political expediency.

          • $29896495

            So what’s wrong with them filling out a log book? Didn’t realise Labor had been in ten years. The other factor in this is that companies will still buy cars as they always have. they are just going to go back to the way they used to do things. Rather than workers getting a car they may get a financial benefit, the way it used to be done to cover costs. What’s wrong with that?

          • Melbourne tax avoider

            Lease cars (without logbooks) are a benefit mainly if you earn 100K plus, then you get the 25 % less tax on the running cost. Why is the govt supposed to take from lower income earners to subsidize the higher earners who take advantage of this rort – to support the BMW/Mercedes foreign car industrly. Mind you, if you can’t beat em, join them. the $ 1.8 Billion could be much better used just directly subsidizing holden or ford (or perhaps even public transport).

  • svd

    All this furore in the press regarding this FBT change with companies laying off people. When did this become law? Has K Rudd won the election? Is it April 2014 already?

    • $29896495

      Obviously stories of people being sacked because of this are a beat up. Those companies still have to service ALL current arrangements. In the end all people on the scams have to do is keep a log book the way it used to be not to long ago.

      • Sumpguard

        The funny bit is that Abbott and Hockey are all over the job losses and yet they plan to sack thousands of public servants if elected. Those people won’t get a say either! Hypocrites !!

  • Rick

    If they are truly used for work as they are meant to be . there is no issue , it’s only those who are abusing the system that will be effected .

  • JamesB

    Sorry, but no law can ever save local manufacturing, particularly Holden. The high labour cost plus the fact that the products aren’t appreciated in a global sense only hints at an imminent death. Ford Oz was given three years to live, and the Lion will follow soon after. The Commodork may have made it to the States as the Chevy SS, but at prices that can buy BMWs there, I won’t be surprised if it fails.

    • Max

      Labor is cheap enough here. Its the Executive management that costs 100s of millions a year + perks is what’s killing the industry in Australia at the root. A pay rise for fake productivity improvement when all thats done is outsourcing to a cheaper place is a disgrace.