17/07/2013 - 15:46

AHG, AP Eagers downplay FBT impact

17/07/2013 - 15:46

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While the salary packaging sector, tax advisers and automotive manufacturers are up in arms about Prime Minister Kevin Rudd's proposed changes to the fringe benefits tax deductions for vehicles, the two largest car retailers have said the changes will not significantly affect their businesses.

AHG, AP Eagers downplay FBT impact
AP Eagers and Automotive Holdings Group are not worried about changes to the FBT

While the salary packaging sector, tax advisers and automotive manufacturers are up in arms about Prime Minister Kevin Rudd's proposed changes to the fringe benefits tax deductions for vehicles, the two largest car retailers have said the changes will not significantly affect their businesses.

Car retailers AP Eagers and Automotive Holdings Group have advised their shareholders that the proposed changes to fringe benefit tax provisions announced yesterday by the federal government are not expected to have a major effect on their revenue.

AHG managing director Bronte Howson said some of the headline reporting of the proposed changes had been sensational and largely unsubstantiated.

"We read yesterday a headline that suggested the proposed FBT rules will cripple the car industry," Mr Howson said.

"Frankly, the automotive retail industry has seen similar predictions of doom and gloom from the original introduction of the FBT to the carbon tax and the recent manufacturing closure announcements, none of which have sent retail sales into a tailspin," he said.

Mr Rudd announced on Tuesday that all FBT deductions for employer provided or salary sacrificed vehicle expenses will have to be supported by a logbook, a move from the previous method of claiming a flat rate of 20 per cent of the cost of the car.

The FBT changes are expected to save the government $1.8 billion and were announced as part of the government's decision to pay for a proposed move from a carbon tax to an emissions trading scheme a year earlier than planned at a cost of $3.8 billion.

Tax advisers and the salary packaging sector have complained the changes are too complicated and are a costly administrative burden.

The Federal Chamber of Automotive Industries has called on the federal government to reconsider the decision saying a change could spell disaster for the already ailing industry.

Mr Howson said salary sacrificed cars represented a small, low margin part of its business, mirroring comments from AP Eagers who said salary-sacrificed cars contributed less than five per cent of the company's new car sales volume.

AP Eagers chief executive officer Martin Ward said because employer-provided cars are bought primarily for business use, he did not expect there to be a significant impact on employer-provided cars.

"In the longer term, the expectation is that the changes will not have a material impact on total vehicle usage in the Australian market," Mr Ward said.

The removal of the current car fringe benefits tax, known as the statutory formula method, will apply to contracts entered into after July 16, 2013 and it will be effective from April 1, 2014.

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