Car manufacturers are critical of the federal government’s decision to remove the fringe benefit tax (FBT) concession on vehicles to help pay for the early change from a carbon tax to a emissions trading scheme (ETS).
As the Business Spectator reports, on Tuesday Prime Minister Kevin Rudd announced that the change to a market-based ETS will occur on July 1, 2014.
Given that the current carbon price of $25.40 per tonne is expected to initially drop to about $6 per tonne, the move will cost the budget about $3.8 billion over the next four years.
To pay for this shortfall, one of the measures the government will take is to make FBT changes relating to salary-sacrifice and employer-provided motor vehicles. This step will be worth about $1.8 billion.
The fringe benefits tax break by which 500,000 Australians now use company cars or cars bought through salary sacrifice for private use will be stopped.
From April 2014, any driver who receives a new employer-provided car or car bought through salary sacrifice will have to keep a log of their private use of it. Such use will be subject to the FBT. The existing statutory formula will continue for existing contracts and cars, but no new ones will be allowed.
This move is opposed by the Federal Chamber of Automotive Industries (FCAI), which claims it will have a negative impact on sales of both imported and domestically manufactured cars.
"The effects will flow right through the industry, including to dealerships and service centres," FCAI chief executive Tony Weber said in a statement.
"I want to know if the government truly understand the consequences of this decision, and why the industry was not consulted on such a significant change."
But according to Industry Minister Kim Carr said the decision ''simply ensures that people who claim a business tax deduction are doing for business use of a car, and not for private use''.
He said the shift to an ETS is expected to cut the costs of Australian-made cars by $40 a vehicle. He added that if the tax crackdown has an unintended negative impact on the industry such impacts could be addressed in the new car plan which the industry is seeking.