As the FBT fallout continues, one of Australia’s largest car companies has attacked Prime Minister Rudd’s changes.
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.
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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?