Holden joins fight against FBT

17 July 2013
, CarsGuide
Holden joins fight against FBT
Holden expects the FBT changes will not only affect sales, but cost the company $5 million to cover its own company fleet.

It took Holden the better part of yesterday and today to calculate the true impact on its business, not least of which is an estimated $5 million hit to its bottom line just to cover the Fringe Benefits Tax on its own company fleet, let alone the expected drop in demand for its locally-made vehicles.

“Holden's initial assessment of the proposed fringe benefits tax changes indicates it will have a significant impact on our business,” said Holden spokesman Sean Poppitt.

“While we don’t yet know the size of the impact on sales of new Holdens, anything that reduces new vehicle sales is detrimental to our operations and a cause for concern.”

The comments echo those made earlier by Toyota and the Federal Chamber of Automotive Industries. Holden had been conspicuously silent on the issue because it is in the middle of sensitive negotiations with government over funding for manufacturing beyond 2016.

Up to 70 per cent of locally-made Holdens and up to 80 per cent of locally-made Toyotas are bought by fleets. But leasing experts predict many company car drivers will switch to cheaper or older cars to avoid paying between $1400 and $4000 FBT each year.

Some leasing companies have stopped deliveries of new cars until they can assess the impact of the FBT changes -- and Australia’s peak motoring group warned the new rules will impact road safety because they encourage the purchase of cheaper and older cars.

“This is a tax on road safety,” said Andrew McKellar, executive director of the Australian Automobile Association, the not-for-profit body which represents 7 million motorists via motoring clubs.

While stopping short of saying the changes to FBT will cost lives, McKellar said: “There’s no doubt in my mind this will have an adverse impact on road safety. “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.”

Leasing experts have warned the changes will backfire and the government won't get an increase in tax revenue because company-car drivers will simply switch to cheaper or second-hand cars and register them privately. One of Australia’s largest leasing firms, Smart Salary, issued a bulletin to dealers ordering them to halt new-car deliveries until further notice: “Due to the uncertainty and until we have further clarification of details from the Department of Treasury, all settlements are to be suspended,” the email said in part.

“We will be contacting our … customers to discuss the possible changes over the coming days but I must insist that no deliveries to customers scheduled for the remainder of this week (Wednesday to Friday) take place until you have received settlement advice for that client -- including those orders which have transporters arranged.”

Other leasing firms, including Australia’s largest, the McMillan Shakespeare Group, which manages more than 80,000 vehicles for government and business fleets, is also understood to have temporarily stopped deliveries after it suspended trading on the Australian Stock Exchange in the wake of the FBT changes.

The FBT overhaul -- which affect all new contracts signed since yesterday, and will take in all existing company-car drivers from April 2014 -- means that rather than assume a blanket 20 per cent of company-car use is personal, drivers must fill out a log book to distinguish personal and business use. It will affect about 320,000 new-car buyers each year.

The Deputy Prime Minister Anthony Albanese dimissed the potential impact on Australian car manufacturing. He told ABC Radio: “The chances are it’s not a Holden Commodore [driver rorting the current system] it’s a BMW [driver]”. 

However, figures show that 75 per cent of company-car drivers earn less than $100,000 and drive vehicles worth less than $40,000. The biggest surprise, however, is that the National Tax and Accountants Association came out against the FBT changes -- even though the new rules will lead to more business for its 8000 members. “It will bring the client back to the accountant but, contrary to perception, there is no celebration on our part,” said Andrew Gardiner, spokesman for the NTAA. This is bad policy. Our members are concerned about the wider impact on jobs and the community. This decision doesn’t only affect manufacturers but the entire automotive retail sector.”

This reporter is on Twitter: @JoshuaDowling