Mr Abbott has thus honoured his pre-election commitment to dismantle the former Rudd Government’s July 16 FBT policy bombshell.
Kevin Rudd and Chris Bowen removed FBT concessions in an ill-conceived attempt to plug $1.8 billion dollars worth of budgetary black hole, and they did it, inconceivably, without any prior industry consultation or alert. Chaos ensued.
FBT concessions functioned as an automotive stimulus package, and had been entrenched in Australia for 27 years previously.
Businesses depended on the stability the policy delivered. In defence of the July 16 announcement, Chris Bowen declared: “The world has moved on from when this system was introduced in 1986.”
He claimed the concessions were merely a “loophole” used mainly by the wealthy to expedite the purchase of new “Maseratis and BMWs”.
Unfortunately however, FBT concessions were also important to traditional Labor voters.
More than half of novated leases were actually paid by workers on modest incomes, and many more traditional workers were employed in businesses that support the car industry.
Car sales took a direct hit. During August, Holden’s sales dropped six per cent, and Ford’s plummeted by 20 per cent. Both results were among the lowest on record in the past two decades.
Just days before the election, Tony Abbott and Joe Hockey confirmed their commitment to FBT concession reinstatement.
“A Coalition Government will not proceed with the Labor Government’s poorly thought through changes to the Fringe Benefits Tax arrangements on cars,” they wrote in an open letter.
“We encourage all stakeholders, including employers and employees engaged in salary sacrifice programs, to urgently and immediately return to normal trading activity in order to repair the damage done by this ill-considered Labor announcement. “In particular, we want to acknowledge the role that the car leasing and salary packaging industry plays in assisting with new car sales, generating demand and, therefore, generating jobs.”
The car industry and associated financiers are embracing a return to stability.
“This is an extremely positive development,” said Bill Baker from www.NovatedLeasing.com.au.
“It will go a great way to restoring confidence across the board. Both employers and employees will benefit immediately. Industry job security will be restored, and at the same time our clients will once again benefit because their pre-tax income can be applied to the purchase, effectively boosting their purchasing power. This is one of those rare arrangements where everyone involved benefits substantially.”
John Cadogan is a principal at CarLoans.com.au.Visit:www.CarLoans.com.au.
