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Praise for small business Budget

Small focus: The latest federal budget handed down last week has seen a focus on small businesses with the introduction of tax incentives.

Peak bodies still disappointed about failure to repeal the luxury-car tax

18 May 2015

A NUMBER of key automotive industry bodies have expressed dismay over the government’s decision to retain the luxury-car tax in its latest federal budget, but there was also praise for the stimulus package announced for the small business sector.

Small business was a key focus in Joe Hockey’s second budget, which is where many automotive service providers are found, while some in the industry hailed the government for its crackdown on tax avoidance by big companies, something not available to small businesses.

In its budget summary, the Australian Automotive Dealer Association (AADA) pinpointed why the luxury-car tax (LCT) was not repealed in a similar fashion to the now-defunct mining super profits tax and the carbon tax, suggesting it brings in too much money for the government.

The AADA points out that the LCT is set to bring in $500 million in 2014-15, up from $476 million in the previous financial year, and it is expected to keep rising strongly in coming years.

The government’s Mid-Year Economic and Fiscal Outlook forecast that the LCT would raise an extra $240 million a year by 2017-18.

AADA president Ian Field pointed out the unfairness of levying the luxury tax only on cars, not other goods.

“I think $61,884 is hardly a luxury level,” he told GoAuto. “It’s a tax on our customers that makes cars more expensive than they should be. The LCT cuts in at $75,375 for fuel-efficient vehicles.

“We collect whatever the government tells us to collect and then some politicians playing to sentiment, not the facts, say our luxury cars are too expensive.

“We have the most competitive right-hand-drive market in the world and dealers sell new cars within that framework.”

The Victorian Automobile Chamber of Commerce (VACC) was also disappointed the LCT was not repealed, although it noted that the tax would no longer be payable by museums when acquiring cars for display.

“VACC is disappointed, but not surprised, that the focus on the LCT stopped there,” VACC executive director Geoff Gwilym said.

“The VACC has campaigned for this unfair tax, which applies to vehicles but not to other more luxurious goods such as yachts, fine wine and art, to be removed.”“Ditching the LCT is particularly relevant at a time when the government is considering the deregulation of new-car imports in the name of improving vehicle affordability,” Mr Gwilym said.

“We urge the federal government to reconsider relaxing new-car import restrictions and for it to realise that cutting the LCT will do the very thing that it is trying to achieve, and that is make new vehicles more affordable for Australians.”

However, the AADA, the VACC and the Australian Automotive Aftermarket Association (AAAA) were supportive of the small business stimulus package, as a large proportion of their members qualify for assistance thanks to having revenues of less than $2 million a year.

“VACC’s more than 5000 business members welcomed the treasurer’s emphasis on small business,” Mr Gwilym said, noting the cut in tax rate by 1.5 per cent to 28.5 per cent, the tax deduction of up to $1000 for unincorporated businesses and the immediate availability of tax deductions for asset purchases up to $20,000.

Mr Gwilym also highlighted his support for the crackdown on tax avoidance by big businesses and the proposal to introduce the goods and services tax (GST) to online purchases.

“VACC would have liked the treasurer to provide more details on the proposal to introduce GST on online purchases, an issue VACC’s retail members would welcome,” Mr Gwilym said.

“Many of them miss out as buyers source (VACC members’) advice, but purchase online from overseas, and avoid GST.”

The AADA’s Ian Field felt that the government’s different tone, as well as the small business stimulus, would be helpful.

“Sentiment plays a large part in the retail world. The government have changed language from the over-the-top crisis rhetoric of last year, to a far more positive outlook. That’s good for business,” he said.

“Appealing to small business by allowing brought-forward tax deductions will increase June sales and is therefore welcome within all retail industries.” The Federal Chamber of Automotive Industries (FCAI) reiterated its support for the retention of the Automotive Transformation Scheme, which had been announced earlier this year by the minister for industry and science Ian Macfarlane.

The government announced in last year’s budget that it was going to end the scheme in 2018, following the exit of the three remaining car-makers – Ford, Holden and Toyota – but then backed down following pressure from the opposition and independent senators to keep the funding scheme in place.

“This commitment provides Australia’s automotive manufacturing companies with the certainty they need to help transition their operations,” said FCAI executive director Tony Weber.

“This is particularly important for small and medium businesses in the automotive manufacturing supply chain, who have already factored ATS funding into their long-term business and investment decision-making processes.”

Mr Weber also called on the government to have a plan for the automotive sector after the factories are closed.

“It is important that government and Australians recognise that Australia will continue to play a key role in the global automotive industry long after manufacturing ceases.”

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