Press Release 22 July 2013

FBT Fact Sheet 22 July 2013 THE REAL IMPACT OF THE RUDD GOVERNMENTS MOTOR VEHICLE REFORMS
Figures consolidated and released today from ASPIA (Australian Salary Packaging Industry Association) confirm that the costings behind the Rudd Governments 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 Governments 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 Governments $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 Governments 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 Governments ability to realise $1.8 billion in savings: Job losses: more than 300,000 people are employed directly and indirectly in Australias automotive industry according to FCAI given that approximately 21% of all new vehicles sold in Australia annually are benefit vehicles (as modelled by Access Economics and Lateral Economics in response to the Henry Tax Review) the loss of jobs across the automotive industry and its associated supply chain may run into the tens of thousands

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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

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In fact, modelling by Access Economics and Lateral Economics 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 ASPIAs 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.
Data Sources: 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

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About ASPIA Representing 25 Member organisations across Australia who are responsible for the administration of Fringe Benefits Tax arrangements for circa 750,000 Australian employees, ASPIA provides a focus for the discussion of the overarching legislative and taxation issues affecting providers within the growing outsourced Salary Packaging industry and their corporate and individual employee clients. ASPIA ensures that the industry has a voice across the areas within both Government and the Tax Office to ensure consultation occurs and that this organisation provides Government and Treasury with the leverage available from the collective membership of the association. The association also sets minimum guidelines in relation to service and inter-provider engagement as well as providing a complaints handling facility for member firms customers. For more information please visit: www.aspia.com.au

For further information please contact:

Leigh Penberthy, President ASPIA M: 0411 883 296 E: president@aspia.com.au.

Rod North, Managing Director, Bourse Communications Pty Ltd T: (03) 9510 8309, M: 0408 670 706, E: rod@boursecommunications.com.au

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