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Rudd should have consulted industry

Prime Minister Kevin Rudd looks on during a media conference announcing changes to the fringe benefits tax on cars.

Had the Rudd Government consulted anyone in the car industry about the sudden and radical changes to the Fringe Benefits Tax rules it would have been warned against the catastrophic impact.

Instead a decision based on incorrect data announced without warning has seen about 300 people clear their desks in the past three days alone.

Unless the Rudd Government does the right thing and reverses the FBT changes instantly hundreds more jobs will go next week too, and new-car sales will continue to dive.

The most perplexing aspect is that it is a massive own goal. Contrary to creating a new tax that would affect drivers of luxury cars, the majority of those affected are public sector workers.

A study of 100,000 novated leasing contracts by the Australian Salary Packaging Industry Association found State and Federal Government public servants represent the largest portion (33 per cent) ahead of those in charities and public health (28 per cent), police and teachers (21 per cent) and then the private sector (18 per cent).

Having interviewed public sector workers affected by the changes, I’ve seen the result of this mess first-hand. Steve Dickson, 51, who works in education in West Australia, currently owns a Kia Sorrento SUV and had ordered a Hyundai Santa Fe SUV six months ago. But he is due to take delivery under the new rules.

“The changes have put me in a bind. I purchased the new car on the understanding that I would be leasing it on a salary packaging arrangement. I’ve contacted the dealer to try to pull out of it but I’ve got a signed contract. So I’ve got to come up with the cash now.

“If I had of known the FBT rules were going to change I would have just kept my old car. To pull the rug out from under my feet is just unbelievable.” There is no doubt there is scope to review the current FBT regulations on cars.

But why not increase the rate of personal use from 20 per cent (as it was until Tuesday) by 5 per cent each year for five years, so people can see the changes coming and can plan accordingly? Anyone not happy with the arrangements can fill out a logbook if they feel hard done by.

What the Rudd Government has miscalculated most, however, is that the current system is not a rort. People who have taken up the offer are law abiding citizens taking advantage of a system put in place and sustained by successive governments.

It has in fact been one of the massive drivers of new-car sales over the past decade. And how much extra revenue has that created?

This reporter is on Twitter: @JoshuaDowling