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Local car-makers brace for 20 per cent sales hit

Localised pain: Sales of Aussie-built cars such as the Toyota Camry will suffer as a result of proposed changes to FBT rules.

FCAI says FBT reform to reduce car sales by 10 per cent, with locals hit hardest

29 Jul 2013

SALES of Australian-built vehicles are set to fall by almost 20 per cent, and total new-vehicle sales will be hit by at least 10 per cent, if the federal government’s proposed changes to fringe benefits tax rules are implemented, according to the Federal Chamber of Automotive Industries (FCAI).

The local car industry has this week continued to apply pressure on the Rudd government, which is holding firm on its proposal to remove the 20 per cent FBT statutory formula method for salary-sacrificed and employer-provided vehicles.

This is designed to save taxpayers up to $1.8 billion, helping pay for the government’s early move to an emissions trading scheme.

FCAI chief executive Tony Weber today described the impact on new-vehicle sales as “terrible news for car makers – importers and local manufacturers – who rely on volume to be viable in this country”.

“The FCAI has undertaken analysis and even more concerning is that when we look at our local manufacturers alone, we expect the drop in their sales to be significantly higher – averaging almost 20 per cent,” he said.

“It has already been a very difficult time for local manufacturing in this country.

“I fear the government’s decision to change the FBT policy for vehicles could have a dire effect on Australian car production, including the manufacturing supply chain.” Mr Weber also emphasised the “strong impact” the FBT change will continue to have on the broader car industry, including importers, dealerships and finance companies.

“Once again I call on the government to reconsider this decision,” he said.

Responding to the FCAI’s figures, Federation of Automotive Products Manufacturers (FAPM) chief executive Richard Reilly said: “The FCAI has made it clear, FBT changes will reduce the volume of cars built locally.

“This affects our members who are already suffering from historically low production volumes. It will have extreme consequences for component manufacturers.

“Policy changes should focus on improving local manufacturing. This was the spirit of the FBT exemptions when they were implemented over 20 years ago.” Mr Reilly said the FAPM proposes extending the FBT exemption to vehicles with hybrid technology or which contain factory-fitted LPG systems.

The FAPM also wants to see an FBT exemption for all locally made cars.

Opposition leader Tony Abbott has vowed to scrap the FBT reform if elected, and has also continued to campaign on behalf of the motor industry.

“The motor industry has had yet another kick in the guts because Kevin Rudd just does not understand how to govern” Mr Abbott said at a doorstop interview on Sunday.

“You ask yourself what has actually changed in our country over the last month since Kevin Rudd became prime minister. The boats are still coming in record numbers, the carbon tax is still in place, the faceless men are still running the Labor Party, hundreds of jobs have been lost in automotive leasing, thousands of orders for new cars have been cancelled, hundreds of millions of dollars in wealth has been destroyed, all because Mr Rudd is incapable of proper process when it comes to governing this country.

“The decision to change the fringe benefits tax on car leases will hit hundreds of thousands of ordinary Australians by $1400 a year in extra tax. That’s a $1400 a year slug on nurses, on charity workers, on sales reps they just don’t deserve this hit, this kick in the guts from Mr Rudd but it is typical of the sort of thing that we will see again and again and again from Mr Rudd for as long as he is prime minister.

“This decision was made with no consultation whatsoever. Without any real understanding of the way the motor industry works and typically of Mr Rudd because this is a tax which is going to destroy economic activity it is more likely to end up costing money not raising revenue.” Federal treasurer Chris Bowen stands by the government’s FBT reform, which he says “is good tax policy” which “protects the tax base for the vast majority of Australians who do not benefit from the salary packaging arrangements”.

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