EXCLUSIVE FBT changes stop new-car deliveries

Australia’s largest leasing companies have stopped deliveries of new cars until at least next week until they can assess the impact of the Rudd Government’s sudden overhaul of company-car tax rules.

One of Australia’s largest leasing firms, Smart Salary, issued a bulletin to dealers late yesterday ordering them to halt deliveries until further notice.

The email distributed late yesterday says in part: “Due to the uncertainty and until we have further clarification of details from the Department of Treasury, all settlements are to be suspended as of close of business today -- Tuesday 16th July.

“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.”

The email said only new-car orders that were settled on or before the morning of the Rudd announcement could go ahead. 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.

The Rudd Government’s changes to the Fringe Benefits Tax regulations -- which came into effect immediately -- mean 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.

The Rudd Government is banking on the 20 per cent figure being too low and is hoping the extra revenue will help fill the $1.8 billion black hole created by scrapping the Carbon Tax. But leasing experts have warned the changes will backfire because company-car drivers will simply switch to cheaper or second-hand cars and register them privately.

“People who took out novated leases will most likely go back to private purchases to avoid the FBT,” said Fraser Moore, the managing director of FleetCEO which consults to firms with fleets of up to 15,000 vehicles.

“The fear is that company-car drivers will keep their cars longer or buy used cars instead of new. So you’ll likely see a gradual slowdown in new-car sales and a shift to smaller or cheaper models.”

The anticipated slowdown in new-car sales -- after five years of record growth -- will lead to job losses across the automotive retail sector and could cripple the already struggling car manufacturing industry. Up to 80 per cent of all locally-made cars are bought by fleets that are required to adopt the new paperwork-heavy system.

This reporter is on Twitter: @JoshuaDowling