Federal Treasurer Joe Hockey has deemed the car industry "back open in Australia" following confirmation that the Coalition Government will scrap the controversial fringe benefits tax (FBT) rule changes proposed by the previous government.
Announced in July by then-Prime Minister Kevin Rudd, the FBT changes were intended to save the government $1.8 billion by forcing drivers of salary-sacrificed and employer-provided vehicles to keep driving logbooks to prove their vehicle’s percentage of business use, thereby stopping drivers claiming concessions on their personal use.
At the time of Labor’s announcement, Tony Abbott predicted the proposed rule changes would cost 320,000 Australians and average of $1400 per year, while Victorian Premier Denis Napthine projected the country’s local car makers could take a hit of more than 10,000 sales per year.
As promised in the lead-up to September’s federal election, Hockey today confirmed the government would not proceed with previous government’s proposed changes, in a move he believes will return confidence back to new-car buyers.
“I declare today that the car industry is back open in Australia,” Hockey said.
“And it is back open because we are not proceeding with Labor's flawed proposal to change the rules on FBT for motor vehicles.”
New vehicle sales in each month since the rule change announcement have been down on the respective month in 2012, with October the worst at -3.1 per cent. Before the announcement, the market was up 4.6 per cent to the end of July.
Federal Chamber of Automotive Industries CEO Tony Weber today welcomed the government’s confirmation, predicting an uplift in sales in November and December as a result.
“It is hard to have any other explanation for the 3.1 per cent fall in the automotive market, particularly given a number of positive economic indicators across the broader economy in recent weeks,” Weber said.
“With the clarity this announcement gives to consumers, we expects car sales figures will increase in line with the trend in growth we were experiencing prior to the 16 July announcement.”
For drivers of salary-sacrificed and employer-provided vehicles, the announcement means the existing statutory formula method remains an option for calculating the FBT payable on their vehicles.