Carmakers and business groups warn against reforms to fringe benefits tax

Members of the Australian car manufacturing industry are warning the Federal Government about the negative impact of the changes to the Fringe Benefits Tax regulations announced by Prime Minister Kevin Rudd.

Image credit: Holden
Image credit: Holden

Carmaker Holden is the latest to express its worry over the potential impact of the changes on FBT. According to ABC News, Holden has said in a statement that its early evaluations suggest that there might be a “potentially significant impact” on the new car market, particularly on locally made vehicles.

Holden says it fully supports the call made by the Federal Chamber of Automotive Industries to the Government to reconsider the policy.

PM Rudd has confirmed earlier this week that the government would impose new rules on salary-packaged cars to offset the loss that will be brought about by the decision to move to an emissions trading scheme next year.

The cost of dumping the carbon tax would be about $4 billion, and the government plans to compensate for this figure by getting around 320,000 drivers to pay additional tax bills amounting to about $1,400 a year.

The statutory formula method for calculating fringe benefits tax, which is the cost of car multiplied by 20 per cent regardless of actual personal use of car, will be removed. The statutory formula automatically assumes that a significant proportion of use of use of the car is for the purpose of business. Removal of the method will be applied into arrangements entered into after July 15, 2013.

From April 1, 2014, the only acceptable method of calculating FBT would be through operating cost method, which requires a log book to be prepared.

The announcement of the policy change has sparked negative reactions from carmakers and business groups.

Brett Fowler, Automotive Services Partner at Moore Stephens Accountants and Advisors said changes to the FBT regime in order to offset the scrapping of the carbon tax will directly hit the car industry and businesses in general.

Moore Stephens said the increase in administrative duties will discouraged many potential salary sacrificed vehicle options.

“This will most likely impact sales of new vehicles, particularly fleet arrangement,” says the company.

The Australian Industry Group has also offered its comments on the policy change.

“While industry would welcome the reduction in costs in the 2014-15 year that would come from the earlier conversion of the carbon tax to an internationally-linked ETS, there are major concerns with a number of the funding measures announced today,” said AI Group Chief Innes Willox in a media release.

“There are very serious concerns about the industry impact and the additional compliance costs of the proposed change to the tax treatment of cars.”

The change to the FBT treatment of cars will mean that taxpayers will face additional tax bills every year including long after the cost of the earlier switch to the ETS has been fully recovered.”

Meanwhile road safety experts also warned that changing company tax rules could cause buyers to shift to smaller, cheaper and older cars, according to a report on The Australian.

“This is a tax on road safety,” said Andrew McKellar of the Australian Automobile Association, quoted in The Australian article.

“You cannot increase the tax rate on company vehicles — which have the most advanced safety features — and not expect to have an adverse outcome. It is absolutely a step backwards for road safety,” he said.

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