Australian Auto Industry Cries Foul Over Tax Change

Canceled vehicle orders and staff layoffs are hitting a stunned Australian auto industry after the federal government abruptly changes the rules on the fringe-benefits tax.

Under the changes imposed by the government of newly elected Prime Minister Kevin Rudd, people who receive a company car as part of a salary package now must use logbooks to document the vehicles' use for both personal and business purposes.

Their employers then will have to pay a fringe-benefits tax (FBT) on the portion of vehicle costs relating to private use. Previously companies could use a statutory formula to nominate a figure of 20% and not justify that claim.

Fleetcare, Australia’s largest independent fleet-management company, is laying off 20 staff – a quarter of its payroll – as demand for salary-packaged vehicles has largely evaporated overnight.

Amid frantic calls from anxious customers seeking to cancel car orders, it says new-lease business has dropped 95% since the government announcement.

Fleetcare founder and CEO Nigel Malcolm says the worst part is that it is all unnecessary.

“If the government had consulted the industry, we could have worked out a plan that delivered a more positive outcome for everyone,” Malcolm says in a statement. “Along with colleagues in the industry, I call on the government to reverse its decision for the sake of jobs, working families and the economy.”

Federal Treasurer Chris Bowen claims the overnight change will save A$1.8 billion ($1.66 billion) over four years with the money used to support Australia's A$3.8 billion ($3.5 billion) transition from a fixed-carbon price to a floating emissions-trading scheme linked to Europe a year ahead of schedule.

Fleetcare estimates more than 70% of managed fleets use the statutory method to account for car use.

“A business owner now faces the stark choice between telling staff they will earn A$4,000 ($3,691) less because of the tax, or taking that same amount of money out of company profits,” Malcolm says.

“Logbooks offer no real solution because business must bear the cost of managing and verifying travel logs. That’s 12 weeks of data per car every five years. If a driver’s job changes, if they’re given a new business territory, if their home or business address changes or there is any material change for the driver, then the driver will need to do another logbook.

“When you have a fleet of vehicles of any size, it’s a massive undertaking,” Malcolm says.

The Victoria Automotive Chamber of Commerce and its Australian Automobile Dealers Assn. members say it is obvious the tax change is going to affect new-car sales because dealers already are reporting a suspension of settlements and cancellation of deliveries to customers.