Monday, July 22, 2013

Could the new FBT rules help local auto?

In areas where there are a lot of tax abuses taking place, benefits are often removed. The concessions on car travel under the fringe benefits tax held up for a long time, despite abuses, because they helped the local car manufacturing industry.

But my circle of friends and acquaintances have too often used the concessions to lease expensive imported cars, while in other areas they were used for domestic travel rather than work. And although fleets are an important part of demand for locally made cars, the fleet demand is now a much lesser percentage of local car sales than, say, 10 years ago.

Right now the government is negotiating with General Motors and Toyota over ways to ensure that Australia continues to have a local car manufacturing industry. While I have no inside knowledge, the federal changes to the fringe benefits tax are likely to be part of that negotiation, and will become an important issue.

And so some the of $1.8 billion to be raised over four years – a staggering sum – may be clawed back to maintain a local automotive industry. But the amount of money involved will be far less than such a claw-back would cost five or 10 years ago.

The two groups I feel for are, first, the lower paid workers who really need that FBT vehicle concession, and second, the smaller businesses that need the concession but do not have the time to undertake yet another layer of paperwork required by Canberra under the changes.

In essence, motoring is going to be more costly for a large number of people. For some, their employer will absorb the cost, while others will allocate more of their personal money to motor travel.

For others, it may mean they use one less car, or lower priced cars. Demand for a less expensive car could take buyers back to the local products of either General Motors or Toyota. Both are now making much better cars than they did a few years ago.

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