Leading industry figures insist the Federal Government’s changes to rules on fringe benefits tax (FBT) will have “dire consequences” for Australia’s automotive industry.
Prime Minister Kevin Rudd yesterday 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 the carbon tax to a floating carbon price under an emissions trading scheme (ETS).
The changes will force workers with salary-sacrificed or employer-provided vehicles to use a logbook to keep detailed records of the personal and business use of their vehicle if they intend to claim FBT concessions, ending the statutory formula method that was introduced in 2011.
Federal Chamber of Automotive Industries CEO Tony Weber says the changes undermine the long-term certainty the FCAI and its members have called for from government and threatened to affect around one-third of new car sales in Australia.
“The effects will flow right through the industry, including to dealerships and service centres,” Weber said.
He said he doubted whether the government truly understood the consequences of its decision, and questioned why the industry was not consulted on such a significant change.
“I fear what this means for domestic manufacturing and I am urgently seeking meetings with the government to encourage them to reconsider this decision,” he said.
Toyota Australia spokeswoman Beck Angel said the local manufacturer strongly supported the FCAI’s call to the government to reconsider its policy, insisting the impact on its operations would be “significant”.
“Our initial assessment is the proposed change has the potential to have a major impact on the new car market in Australia,” Angel said.
“As market leader, this would significantly affect Toyota and in particular our locally built vehicles, which are heavily reliant on sales to business and government fleets.”
Australian Motor Industry Federation CEO Richard Dudley labelled the government’s decision not to consult the Australian automotive industry before deciding to make significant changes to the FBT rules “a disgrace”.
“Had the industry been consulted, we could have provided input into alternative FBT arrangements that would have assisted the government in achieving its objectives towards the ETS, while supporting the domestic automotive industry and continuing to provide surety to small business operators,” Dudley said.
“Instead we are left with another policy-on-the-run announcement that provides little detail in terms of the new arrangements and the added insult of an immediate extra burden upon consumers and that also increases the compliance burden upon small business.”
Victorian Automobile Chamber of Commerce executive director David Purchase likewise criticised the government for failing to consult the industry and expressed concern that the rule changes might result in decreased new car sales and increased 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,” Purchase said. “A few days later, the Labor Party changed leadership, but clearly has not changed its attitude towards the automotive industry.
“We require more details, but early indications are that the FBT changes will affect new car sales, as buyers of company cars will now have to invest considerably more time in log books and paper work.
“We have encouraged governments to reduce red tape and free small business owners and their employees from unnecessary red tape compliance, however it appears that drivers of company cars will now have to keep a record of every journey they make,” Mr Purchase said.
As of yesterday, all new salary-sacrificed or employer-provided vehicles will only be eligible for FBT concessions if a logbook is provided to prove its percentage of business use. The changes, which take place from April 1, 2014, are designed to stop workers claiming tax concessions on the personal use of salary-sacrificed vehicles.
Under the old system, just 20 per cent of a vehicle’s cost was subject to FBT, regardless of its percentage of personal and business use.