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Fleet management frees up core business

MANY businesses are now turning to fleet management companies to take care of their vehicle needs.

A large number of companies have found it is more important to concentrate on the core areas of their business.

Even State and Federal Government departments have outsourced their fleet needs.

The length of time a company holds onto a fleet vehicle largely depends on tax requirements.

Most tend to keep fleet cars for two to three years but that can drop to a year depending on the amount of use the vehicle receives.

Novated leases have proved popular with fleet buyers. These allow employees to keep their cars when they leave a company and transfer lease obligations to the employer in the meantime.

They are popular because employees have more vehicle choice and they believe they are acquiring equity in the vehicle. However, these leases could prove risky under the GST.

In fact, the GST appears to be causing a lot of uncertainty in the fleet leasing marketplace.

Most fleet companies are unwilling to comment on how they feel the GST will affect their businesses.

PricewaterhouseCoopers senior manager Karen Dill-Macky said there were some transitional rules for a business’s eligibility for tax credits with regards to the ownership and use of the car.

“A lot of this legislation has problems in practice and we are anticipating amendments which should be out in the next few weeks,” Ms Dill-Macky said.

“I have heard unconfirmed reports car leasing companies were increasing their rates by as much as 15 per cent in anticipation of the GST.

“This is called price exploitation and is covered by extensive Australian Competition and Consumer Commis-sion guidelines,” she said.

Motor Trade Association of WA executive director Peter Fitzpatrick said there has been a fall-off in new car sales of 11 per cent in the twelve months since July last year.

“If this trend continues, it may be in the interest of the Federal Government to add incentives to encourage buyers back to the market,” he said.

“The GST will cause the price of new vehicles to come down, and it stands to reason the price of trade-ins will also drop.

“The government may have to apply the same reduction in the wholesale sales tax rate to cars as they are doing to whitegoods and brown goods.”

Mr Fitzpatrick said it was difficult to predict the possible effects of Fringe Benefit Tax on fleet systems as amendments to the tax were soon to be announced.

“There have been many changes mooted and it’s too hard to predict what will happen to corporate fleet systems until we know for sure where those changes are going,” Mr Fitzpatrick said.

“There are indications there may be changes to the rules in terms of mileage claimed, which will have a definite effect on country salespeople.

“The government will probably want to raise capital through FBT in anticipation of lost funds from reductions in Capital Gains Tax,” he said.

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