FBT changes under fire

by Cameron Edmond20 Aug 2013

Hyundai has criticised the Rudd Government’s FBT changes, revealing a 37% slump in fleet orders over the last fortnight.

As previously reported by HC, the changes will remove the statutory method of valuing the taxable value of a car fringe benefit, which is calculated at 20% of the car. Instead, the cost method of reporting distances travelled for work in the car and calculating the taxable value based on that will need to be used.

Organisations already using the cost method of reporting will not be affected.

Describing the changes as “throwing a hand grenade”, John Elsworth, COO of Hyundai Australia, told News Ltd that the lack of consultation and shock announcement has rattled buyer confidence. “It is difficult to see how it will be a positive move,” he stated.

Elsworth explained that automotive product investments are long-term ventures, with ordering taking up to six months at times. The changes have been implemented too fast, which is unacceptable for such long-term and important decisions.

According to The Australian Fleet Lessors Association (AFLA), forward orders dropped 20% in the fortnight after the announcement, with the first two weeks of August seeing the drop reach 37%.

"This alarming reduction in business is entirely attributable to the removal of the statutory formula option," Senator Kim Carr, federal industry minister, said. "It has had a serious immediate impact on business in this industry sector with devastating consequences for those suffering loss of employment. Further job losses are inevitable if this measure proceeds."

Carr announced a $200m assistance package for local car manufacturers to offset losses they may receive.

Although a great deal of criticism is mounted against the FBT changes, Robert Gottliebsen, writing for Business Spectator, stated that the statuary formula was greatly abused by organisations for a long time, with employers importing expensive cars or using cars for personal travel as opposed to work. As such, the removal of this method may actually bolster local businesses, as organisations are less likely to splurge on imported (and more expensive) cars.

Dale Boccabella, writer for LifeHacker, also approached the topic from a different perspective.

“Some of those complaining about the removal of the statutory formula method may genuinely believe that the government is imposing a tax increase on them over and above what a benchmark income tax would impose, rather than seeing the government’s announcement as the removal of a tax concession,” Boccabella said. “Many complainants though will be moved by pure self-interest and these people know full well they have been accessing a tax concession.”

The FBT changes are a controversial issue. What do you think of the changes, and will they affect your organisation?

 

COMMENTS

  • by kevin 20/08/2013 4:53:50 PM

    It is about time the Labor Part looked up two words in the dictionary namely, consultation and consequences. Reminiscent of the Life cattle export debacle.
    Also appears that they also need a definition of "positive" as opposed to "negative" campaign.
    Sugges we give them at least 3 years off to go back to school.

  • by Peter 21/08/2013 12:09:12 PM

    My initial evaluation when the changes were initially promoted was 'me thinks they protest too much'. Simplistically the change was explained to me as returning to the requirement of recording mv travel for a period of time. It might be dated but difficult to get around due to its basic nature.

    I am usually suspicious of responses within hrs of a policy change that rant about 000's of job losses, naming sectors and categories affected...because I doubt the respondent has sufficient modelling for the rant to be based on 'the real facts of the matter'.
    Those real facts will be revealed so long as a conversation is involved.

  • by kevin 21/08/2013 12:24:37 PM

    The immediate impact on our business is that 103 car orders have been cancelled, we are no longer able to develop employment contracts as before and recruitment is being impacted. But thats just us. Perhaps I should have gone to Treasury for a more formal outlook. Reality is reality. Also what is equally important with such changes is to review the purpose of what was in place and why it was introduced in the first place. Suggest if you bothered to check the ATO were fed up with the need to check 1000k of tax returns. What is the impact of this change on their capacity and capability and resources. But that is reality isn't it. Yet another example of policy on the run - good for the joggers amongst us.

Most Read