Find out what is happening in the salary packaging world
FBT Fact Sheet
22 July 2013
THE REAL IMPACT OF THE RUDD GOVERNMENT’S MOTOR VEHICLE REFORMS
Figures consolidated and released today from ASPIA (Australian Salary Packaging Industry Association) confirm that the costings behind the Rudd Government’s proposed motor vehicle reforms are flawed and have been collated without any consultation.
“The data we have been collecting in the days since Mr Rudd announced his policy reforms is tellingly at odds with information the policy appears to have been based on, which raises legitimate questions around the veracity of the Government’s costings,” said ASPIA President Leigh Penberthy.
“For example, the Treasurer and various Ministers have been suggesting that salary packaging is somehow the domain of the wealthy by saying only those that drive high end luxury cars and earn high incomes benefit from packaging. Our data confirms it is actually middle income earners, largely from the not-for-profit and public sectors, who drive modest vehicles that will be hardest hit. Specifically, this would affect teachers, nurses and charity workers who drive everyday cars like Toyotas, Holdens and Fords.”
ASPIA has collected a volume of information from its member organisations and other independent sources, revealing the following:
Unravelling the Government’s $1.8 billion in savings
To date, despite repeated requests from the industry, there has been no explanation from the Government as to how the $1.8 billion in savings arising from the change has been calculated. ASPIA believes the Government’s calculations do not take into account the significant negative revenue impacts that will flow throughout the entire Australian automotive industry (and associated supply chains). Specifically, there are a number of factors that will impact on the Government’s ability to realise $1.8 billion in savings:
- Job losses:
- more than 300,000 people are employed directly and indirectly in Australia’s automotive industry according to FCAI
- given that approximately 21% of all new vehicles sold in Australia are benefit vehicles (Deloitte Access Economics Pty Ltd and Lateral Economics, Fringe Benefits Tax Analysis for the Henry Tax Review, March 2009) the loss of jobs across the automotive industry and its associated supply chain may run into the tens of thousands
- Reduced production within this sector and associated job losses will mean lower company and personal tax revenue
- Reduced vehicle sales means a drop in GST, stamp duty and new car registration fees which ultimately impact on respective State Governments.
Sectors that salary package
ASPIA has reviewed the salary packaging data for over 100,000 vehicles and confirmed the following sector by sector use:
- Charities & public health – 28%
- State & Federal Government public servants – 33%
- Police & teachers – 21%
- Private sector – 18%
Salary packaging at a glance
ASPIA has reviewed the salary packaging data for over 100,000 vehicles and confirmed:
- The average price of a packaged car is just $34,500
- Just 5% of packaged cars are BMW, Mercedes and Audi
- 35% are made by local manufacturers Toyota, Ford and Holden
- Over 70% of drivers earn less than $100,000
Salary packaging & new car sales
- The Government has estimated that the recent decision will not unduly impact the Australian vehicle industry, and yet:
- There are approximately 550,000 employee benefit vehicles on Australian roads at any one time. This is in addition to the tool-of-trade vehicles owned or leased by a large number of Australian businesses and Federal, State, and Local Government entities;
- It is estimated that around 21% of new vehicles sold in Australia annually are employee benefit vehicles; and
- It is estimated approximately 40% of locally manufactured new vehicles sold annually in Australia by Toyota, Holden and Ford in 2012 were employee benefit vehicles
- In fact, modelling by Deloitte Access Economics Pty Ltd and Lateral Economics (Fringe Benefits Tax Analysis for the Henry Tax Review, March 2009) shows that removal of the existing FBT arrangements could lead to a fall in sales of locally manufactured vehicles of up to 10.9%
- It is therefore clear that the proposed reforms will significantly reduce demand for new motor vehicles and will have a disproportionate effect on Australian made motor vehicles (given their large share of benefit vehicle sales).
The complexity of keeping a log book
It is ASPIA’s view that the requirements of a ‘valid’ log book are onerous and will be a significant administrative burden to Australian businesses. It is an oversimplification that logbooks need be maintained only 12 weeks every 5 years. Each of the following instances would require a further 12-week refresh of a logbook:
- Every time a driver changes jobs
- Every time cars are rotated amongst staff
- Every time a driver moves residences
- Every time a driver moves to another branch or location within their employment
- Every time driving patterns change
If a log book is considered invalid for any reason then the entire annual cost of an employee benefit car, including all running costs, become taxable at the top marginal tax rate.
Log books mean significantly higher compliance costs for businesses and organisations across Australia, including government, private and not-for-profit organisations.
It is also likely the ATO will also face challenges in monitoring, capturing and verifying this information given its breadth and complexity.
In addition to benefit vehicles, all tool-of-trade vehicles will be required to operate a log book.
This information has been collated by the ASPIA and is based on data collated from a number of sources including:
- ABS Motor Vehicle Census
- AFLA member data
- ASPIA member data
- ATO Taxation Statistics 2010-11, Fringe Benefits Tax
- FCAI: VFACTS National New Vehicle Sales by Country of Origin, December 2012 and FCAI Key Industry Facts
- Fringe Benefit Tax Analysis Report prepared by Access Economics Pty Limited and Lateral Economics, 16 March 2009