Industry fumes at second-hand Kev

Holden is pushing for an extra $265 million from the government to help it keep building cars in Australia.

HOLDEN has warned it will be hit hard by Kevin Rudd's sudden overhaul of company-car tax rules, as industry experts predict the changes will see a glut of second-hand cars swamp the market.

Some leasing companies are already stopping deliveries of new cars until they can assess the impact of the Fringe Benefit Tax changes.

It is estimated Holden will sustain a $5 million hit to its bottom line just to cover the FBT on its own company fleet alongside the expected drop in demand for its locally-made vehicles.

"Holden's initial assessment of the proposed fringe benefits tax changes indicates it will have a significant impact on our business," said Holden spokesman Sean Poppitt.

"While we don't yet know the size of the impact on sales of new Holdens, anything that reduces new vehicle sales is detrimental to our operations and a cause for concern."

The comments echo those made earlier by Toyota and the Federal Chamber of Automotive Industries.

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The Coaltion has seized on the uncertainty, claiming the industry was in "meltdown" as a result of Mr Rudd's announcement, but they have refused to say if they will oppose it in parliament.

Mr Rudd is adjusting FBT to make up for a change from a carbon tax to a floating price a year early. That reduction from about $24 a tonne to about $6 a tonne will cost the Government almost $4 billion, and it plans to recoup about half that by cracking down on tax concessions for the private use of company-owned cars.

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Under the $1.8 billion savings drive, the new rules would hit salary-packaged car contracts entered into since Tuesday, with effect from April 1 next year.

Motorists can currently assume 20 per cent of the car use is personal use but the new system would require detailed logbooks splitting work use and personal use.

The government has confirmed the changes will be legislative and not regulatory, and will go to parliament as part of a single package with the carbon changes, effectively making the move an election commitment.

Holden had been conspicuously silent on the issue because it is in the middle of sensitive negotiations with government over funding for manufacturing beyond 2016.

Up to 70 per cent of locally-made Holdens and up to 80 per cent of locally-made Toyotas are bought by fleets. But leasing experts predict many company car drivers will switch to cheaper or older cars to avoid paying between $1400 and $4000 FBT each year.

Leasing experts have warned the changes will backfire and the government won't get an increase in tax revenue because company-car drivers will simply switch to cheaper or second-hand cars and register them privately.

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One of Australia's largest leasing firms, Smart Salary, issued a bulletin to dealers ordering them to halt new-car deliveries until further notice: "Due to the uncertainty and until we have further clarification of details from the Department of Treasury, all settlements are to be suspended," the email said in part.

"We will be contacting our … customers to discuss the possible changes over the coming days but I must insist that no deliveries to customers scheduled for the remainder of this week (Wednesday to Friday) take place until you have received settlement advice for that client -- including those orders which have transporters arranged."

Other leasing firms, including Australia's largest, the McMillan Shakespeare Group, which manages more than 80,000 vehicles for government and business fleets, is also understood to have temporarily stopped deliveries after it suspended trading on the Australian Stock Exchange in the wake of the FBT changes.

Australia's peak motoring group has also warned the new rules will impact road safety because they encourage the purchase of cheaper and older cars.

"This is a tax on road safety," said Andrew McKellar, executive director of the Australian Automobile Association, the not-for-profit body which represents 7 million motorists via motoring clubs.

While stopping short of saying the changes to FBT will cost lives, McKellar said: "There's no doubt in my mind this will have an adverse impact on road safety.

"You cannot increase the tax rate on company vehicles - which have the most advanced safety features - and not expect to have an adverse outcome. It is absolutely a step backwards for road safety."

Opposition treasury spokesman Joe Hockey said the changes were "exactly the same as what has happened in the past under Kevin Rudd, it is policy on the run".

Treasurer Chris Bowen said there was no prior industry consultation because the change was not abolishing the entitlement but about ensuring its integrity and that of the tax system.

"If you are going to return to surplus, if you are going to have responsible measures in place, that means sometimes making tough decisions,'' he said.

"Is Mr Hockey ... really saying that their policy position is, if you have a car and do not use it for business use you should be able to claim business use?''

A major Holden dealership says the changes will "take an axe" to the industry.

Mike Claridge, the managing director of Claridge Holden in Adelaide, said they would "effectively put the brake" on car manufacturing.

"It's unbelievable. There was no indication this was even on the radar," Mr Claridge said.

"Certainly in the very short term there'll be significant falls in vehicle sales that will have an immediate negative impact and a significant one.

"For our particular business, like any business, it will mean a significant administration burden, even forgetting the impact on sales."

The Coalition will put out brochures capitalising on the criticism in the SA seat of Wakefield today, saying the industry will be hit with a "$1.8 billion tax slug on top of Labor's carbon tax".

SA Liberal Senator Simon Birmingham called it "rank hypocrisy" that the Government would pledge support for the industry then hit them with the FBT changes.

"This is going to have a very hard-hitting impact on the car industry on all levels," he said,

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