Car industry hits out at government over fringe benefits tax after new sales data, but numbers better than expected

The automotive industry has directed a scathing attack at the Labor government after the release of new sales data, showing car purchases dropped by 0.2% compared to August last year – but the government says it’s not such a bad result.

The attack comes just two days before the federal election, during which the Coalition has attempted to use Labor’s cuts to the fringe benefits tax (FBT) as a weapon.

Heads of companies, having been forced to lay-off staff, have appeared in various television ads.

In a statement, the Federal Chamber of Automotive Industries said prior to the FBT change, vehicle sales had increased on average about 4.8% each month, on a yearly comparison basis.

Chief executive Tony Weber said the 0.2% decrease was “disappointing”, and argued the figure shows consumers are stalling or forgoing purchases of new vehicles.

“Without the return of the statutory formula method for salary-sacrificed and employer-provided cars, the FCAI and its members expect sales will continue to decrease through the rest of the year and into 2014, as the full impact on fleet sales works its way through the system.”

The FCAI was contacted by SmartCompany this morning, but no reply was received prior to publication. The Federation of Automotive Products Manufacturers was also contacted, but no reply was available.

The FCAI said business purchases are down 10%, compared to August 2012, with purchases of light commercial vehicles down 23.4%. Government purchase of light commercials also fell by 7.8%.

However, the figures are still better than some expected. Previously, Weber said he expected the drop to be more in the range of 10%.

In defense of the cuts, Industry Minister Kim Carr has told Fairfax the debate over the FBT changes had been “completely overblown”.

”There will inevitably be a period of adjustment as people take into account these changes, which ensure that ordinary Australians are no longer subsidising the private use of vehicles,” Carr said.

”This adjustment has been minimal – 0.2% according to the FCAI’s data on last year – but August sales are still higher than the same period in 2011 and 2010.”

The FBT change in July eliminates the statutory method of calculating fringe benefits tax, which allows taxpayers to claim a flat 20% of travel for personal use.

The change has not only impacted not-for-profits but leasing companies – one of which told SmartCompany in July it would be forced to lay off staff.