Kevin Rudd (a.k.a. Tantrum Man) has hurled a major speed hump in front of the car industry – and it’s a big problem for you if you use salary sacrifice to help pay for your car.
For 27 years now we’ve had ‘salary sacrifice’ concessions. Tax-efficient car ownership. Ongoing stimulus for the car industry. This week, think again. Salary sacrifices, novated leases - they’ve basically just been taken out the back and executed, North Korean-style.
Prime Minister KRudd and treasurer Chris Bowen have had to borrow from Peter to pay Paul - metaphorically. They’ve sacrificed your salary sacrifice to help pay for sacrificing the carbon tax, in an attempt to stop the electorate sacrificing them at the upcoming Federal election.
Sacrificing the carbon tax – or, at the risk of being really accurate, re-doing its hair and makeup and changing its name, meant a big black hole in the budget. And the perennial golden goose, the Australian motorist, is gunna be picking up the tab on that.
To make up for the shortfall KRudd has scrapped – without warning or consultation – the 27-year-old statutory Fringe Benefits Tax concession on vehicles. This massive shift in the goalposts affects almost 400,000 Australians. And it will drive some businesses – particularly specialist financiers – to the wall.
Dropping the bombshell in this way, without warning, has allowed financiers and car makers no time to prepare, no time to re-engineer the businesses, no time to adapt or otherwise accommodate the changes. It’s policy on the fly.
Previously, the Government merely assumed 20 per cent of the vehicle’s use was personal, and charged you FBT on that – a significant inducement to keep new car sales ticking over by attracting employees whose cars weren’t really for business use. But it wasn’t a rort. This provision was, for the car industry, kinda like what negative gearing represents for property investors – but let’s not be giving Kevin Rudd and his new best mate Chris Bowen any other bright ideas...
Now what you’ll have to do, even if you use your car just this much for business, is keep a logbook. FBT specialist Elizabeth Lucas recently told BRW that getting your logbook wrong might render the whole thing invalid. And that, according to Ms Lucas, could mean the full costs of the vehicle would be subject to FBT – certainly not a happy position to be in.
Treasurer Chris Bowen says all you need for a logbook these days is a smartphone app – so that’s okay. I’m tipping someone else fills in Mr Bowen’s logbook, because he’s obviously too busy rubber stamping Tantrum Man’s other ill-conceived policies on the fly. And doing other high-level stuff. While the pair of them should really be in caretaker mode.
You know, there really were better options than loading every chamber in the revolver and playing Russian roulette with salary sacrifice: Tantrum Man could have commissioned actual research and increased the statutory use percentage to 25 or 30 per cent if it was in fact 20 per cent was too low or unrealistic in the current climate. But the caveat here would be to base it on actual research. Which he is disinclined to do, because Messiahs don’t need to do that. This arbitrary guesswork to balance a budgetary black hole is an irresponsible slap in the face.
So, on one hand you’ve got the Government pledging its support for the car industry, you’ve got Holden on life support because it just can’t sell cars like it used to. Ford has already caved in – because making cars here really is too hard. But Holden wants to extort another $265 million from you and me, and also force its workers to cop on the chin $10,000 each in pay cuts – things are that grim – and on the other hand you’ve got Tantrum Man making the motorist accountable for re-shuffling the carbon tax. These events are both stranger than fiction, but they are directly related.
In this breathtakingly arrogant, ill-conceived move, Tantrum Man will choke off demand for new cars. He’s pumping cash up Holden’s exhaust pipe faster than you can shovel it from a shipping container in twenty-cent pieces, and at the same time he’s putting a noose around the car industry’s neck on the demand side of the equation. That’s a massage in the left hand and a lynch mob in the right. Breathtaking – just not in a Kate Upton kinda way…
More than half the cars made here by Holden and Toyota are subject to salary sacrifice arrangements, according to recent reports. Car sales – especially of locally produced cars – will crash even harder than they already are crashing, as a result. If you make new cars less affordable, less desirable, you push sales into the express elevator and you hammer the button marked ‘basement’. Supply and demand – price-point equivalence. It’s that simple. Economics in the beer garden. You’d think a Prime Minister and a Treasurer could figure this out. Even a below average pair like these two.
One very undesirable effect of a slowdown in new car sales, over time, is that the fleet of vehicles out there on the road gets older. It means the average Aussie will be even further out of date on technology when they drive – and a decade out of date on safety technology is a bad place to be when you crash, and a decade out of date on emissions and efficiency technology is a bad place to be if you breathe.
Basically, this policy props up the budget in part by sacrificing the health and safety of ordinary Australians, down the track. Dumping it on the financiers and carmakers without warning is like fumbling the pin on a grenade. Good people will go to the wall as a result. I’m with Voltaire on this: people are guilty of the good they fail to do – and in my view this applies moreso to Tantrum Man and his treasurer than to ordinary mortals.
There is only one solution. Bring on the Federal election. This government is out of control.
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