Mini-budget leaves car-makers high and dry

NO MORE handouts have been flagged for Australia’s beleaguered automotive industry in a revised federal budget that forecasts fewer people in work and more pain for car buyers.

Today’s update to the government’s budget estimates – which anticipate a $33 billion hit to treasury over the next four years as Australia’s economy slows faster than expected – have revealed little joy for luxury car companies, with a $20 million shortfall in luxury car tax flagged for this financial year to $380 million.

However, the pain is anticipated run even deeper in the 2014-15 financial year, with luxury car tax revenue cut from an expected $400 million to just $350 million.

Treasurer Chris Bowen said last month the government would make changes to the way salary-sacrificed and novated lease cars were assessed under fringe benefits tax laws, raising $1.8 billion towards a $4.8 billion hole in the federal accounts.

Car-makers have said the proposed tax law changes are already biting into sales.

However, the estimates show luxury car sales should recover, with tax revenue rising to $380 million for the 2015-16 financial year, and clawing back to the original 2013-14 estimate of $400 million by 2016-17.

On the flipside, customs duty from imported passenger cars is expected to rise, suggesting a flight from luxury to mainstream models. Revenue is expected to rise from this year’s $920 million to $1.18 billion by the 2016-17 financial year.

The government also used today’s revised budget forecast to quell speculation that it is about to hand the beleaguered Australian car industry even more money – said to be $300 million a year – to survive.

“I think, as you’ve probably seen, there was speculation in the papers (about this industry support measure),” finance minister Penny Wong said.

“The relevant ministry is engaged in dialogue with the car industry, as is appropriate,” she said.

“We’re strong supporters in the government of the continued support of the car manufacturing industry here in Australia.

“That puts us in stark contrast to the opposition, which as you know is cutting $500 million (of support to the car industry) between now and 2015 ... and refusing to commit to anything beyond that.

“If there is to be any further arrangement (for funding) that is negotiated, that will obviously be offset in accordance with the commitments that we make,” Ms Wong said.

Asked if a $500 million lump sum set aside for decisions taken and not yet announced was set aside for car industry support, Ms Wong said the lump sum was “standard accounting practice”, although told reporters to “stay tuned”.