Category: Policy Viewpoint

The 2019 Federal Election has passed and in a result none of the national opinion polls predicted, Prime Minister Scott Morrison’s Coalition Government has won a majority victory. The result has implications for franchised new car Dealers on a number of policy fronts. Below is a brief summary on the implications for some of our key policy areas. Rest assured the AADA secretariat is working with our members and Government to achieve the best possible outcome on all of these issues.

On the Automotive Code the AADA has been calling for, there is little change to the way forward. The AADA worked hard to win bi-partisan support for this crucial policy and the current government has already started work in this area through the development of a Regulatory Impact Statement (RIS). We will be working hard to ensure that this work is finalised by the Minister for Industry Innovation and Science, Karen Andrews.

Another area which is largely unaffected by the election result is the inevitable regulation on the sharing of service and repair information. A draft regulation was close to being finalised before the election was called and the AADA expects that this will gain some momentum in this new term of government.

The changes being proposed to the Australian Consumer Law (ACL), and in particular a proposedLemon Law, are less likely to sail through the Consumer Affairs forum of state and territory ministers given the Coalition’s recent wins federally and in New South Wales. Regardless, the possibility of a Lemon Law cannot be ruled out especially as State Government’s may seek to legislate them independently of the Commonwealth.

There is little change to the Tax Regime for new vehicles following the election. There is an argument that the Coalition is more likely to conclude Free Trade Agreements with the EU and the UK, presenting the best opportunity for the removal of the Luxury Car Tax (LCT) and the Passenger Vehicle Import Tariff. The AADA will also be urging the Federal Government to use its influence to reign in State Governments which are implementing state-based LCTs.

In the finance and insurance space, the Coalition victory is undoubtedly better for the industry. While both Labor and the Coalition have said they will adopt the Financial Services Royal Commission’s recommendation to abolish the Point of Sale exemption, the Coalition committed to a thorough process which considers the impact on business whereas Labor said they would make the change immediately.

Finally, there was a clear contrast in policies on vehicle emissions. Labor committed to a CO2 standard of 105g/km and an electric vehicle target of 50 per cent of new car sales by 2030. The Coalition has no plans to introduce a CO2 standard and has said it will release an Electric Vehicle Strategy at some stage in 2020.

The Victorian Budget brought down on 26 May increases vehicle duty rates for more expensive passenger vehicles. As of 1 July 2019, motor vehicle duty for used vehicles valued above the LCT threshold will be aligned with the rates for new cars. The Budget also introduces two additional duty rate increases for vehicles above $100,000 and above $150,000. The new rates are as follow:

Valued up to $66,331	$8.40 per $200 or part thereof
Valued over $66,331, up to $100,000	$10.40 per $200 or part thereof
Valued from $100,001 to $150,000	$14.00 per $200 or part thereof
Valued from $150,001	$18.00 per $200 or part thereof

Low emission vehicles (below 120 g/km) and those owned by primary producers for the purpose of primary production will be exempt from the LCT rates, and thus will only pay the lowest rate of vehicle duty. This exemption also extends to caravans and motorhomes.

Because of the way the vehicle duty is applied on the value or purchase price, whichever is higher, this increase in vehicle duty is actually a tax on a tax on a tax, as it is applied after the GST, and then the federal LCT are added to the basic cost of the vehicle. This makes the Victorian vehicle duty particularly unfair.

The imposition of these new rates of duty has been met with dismay by the industry as it comes after thirteen months of worsening new car sales. The media has been quick to pick up on the unfairness of the measure, including a front-page article on the Australian Financial Review.

The AADA has sought a meeting with Tim Pallas MLA, the Victorian Treasurer, to discuss the measure and its negative effect on the nearly 1,500 of our members operating in Victoria. We have also sought meetings with the Federal Government, to highlight the impact that this measure could have on the sensitive negotiations surrounding the Free Trade Agreement with the European Union, and the bargaining taking place with respect to both the LCT and the Vehicle Importation Tariffs. We believe that these matters, particularly the potential for other states introducing similar measures in their budgets, should be addressed through COAG.

Not everything in the Victorian Budget was a negative to the industry. For new car Dealers, the exemption to paying vehicle duty has been extended to cover service loan vehicles, as a national first. On a broader canvas, the Government has pledged to increase the monthly payroll threshold for Payroll Tax from $650,000 to $700,000 by 2023. Additionally, the rate of payroll tax has been significantly reduced for regional businesses, from 2.4% to 1.3% by 2022-23. This means that by that year, the rate of payroll tax in the regions will be one quarter of the 4.85% paid by businesses in the metropolitan area. We expect that many of our regional members will be among the 3,500 regional businesses that will benefit from this measure.

The AADA’s push for an Automotive Industry Code has gathered pace as the Government used Mid-Year Economic and Fiscal Outlook (MYEFO) to announce funding for the purpose of developing an Automotive Industry Code of Conduct. As part of this work the Department of Industry, Innovation and Science has prepared a Regulation Impact Statement (RIS) to consider how best to address new car Dealers’ concerns with their franchising relationships with car manufacturers. The AADA has already held a consultation session with the Department and will be attending an industry workshop on the RIS in the coming weeks. We will also be finalising our submission by 13 February.

We now have commitments from the Government and the Opposition as well as support from the Small Business and Family Enterprise Ombudsman, the Franchising Council of Australia and most industry bodies in the Automotive sector. Furthermore, AADA is hopeful that the parliamentary inquiry into franchising will also support an Automotive code when it is released next month. While there is much work to be done, we have made significant progress over the past 12 months.