VACC Federal Budget Analysis: 'Short on Substance'For Victoria's Retail Automotive Industry

SYDNEY – May 9, 2012: VACC, the peak automotive industry body in Victoria, represents more than 5,000 small business owners in the retail, service and repair sector of the automotive industry. VACC was not surprised the Treasurer, Wayne Swan, used his fifth Budget to announce a surplus forecast in a predictable Labor Budget, which was clearly politically motivated. VACC considers the Treasurer was wide of the mark in relation to the retail, service and repair sector of the automotive industry.

VACC believes the Federal Budget did little to boost the automotive industry and fell short of restoring business confidence in the retail, service and repair sector of the automotive industry

“We don’t consider the Treasurer’s surplus forecast goal to be undesirable. It could provide a boost to the economy, however, the prospects of achieving that are low and we should not get side-tracked by this political manoeuvring,” VACC Executive Director, David Purchase, said.

Small Business Asset write offs
One positive policy for Victoria’s retail automotive industry was the $6,500 asset write-off, which will encourage small business owners to purchase new plant and machinery and, commencing on 1 July 2012, will be available almost immediately. Also included is $5,000 of immediate write-off against tax for the purchase of cars and utes, which will enable businesses to upgrade to newer, safer and more efficient vehicles.

Car Industry Grant
VACC supports local manufacturing and the continued financial assistance for Australia’s automotive manufacturers in particular. Therefore, VACC welcomes the $25 million Car Industry grant available to component suppliers and the Treasurer’s announcement of a $29 million Manufacturing Technology Innovation Centre.

“Unfortunately, these positives are lost in the overall sense of disappointment felt by the retail automotive industry. VACC certainly does not object to the Treasurer assisting battlers and their families, but there is little to be gained from this targeted assistance if these battlers lose their jobs,” Mr Purchase said.

Company Tax Rate
VACC was disappointed the promised 1 per cent company tax rate reduction was scrapped. The Treasurer was ill-advised to try and pin the blame for its axing on the Opposition. Small business owners are not interested in finger pointing. The bottom line is that the Gillard Government failed to deliver on a promise when the Treasurer had the option to keep the tax cut and amend the Budget surplus amount.

Tax Loss Carry Over
The tax loss carry over scheme looks good on paper, but in reality, is limited. It will only be available to 110,000 profitable small businesses in Australia and is not effective until the 2013/14 tax year. 750,000 businesses in Australia were going to benefit from the company tax cut, meaning that 640,000 will now miss out.

VACC agrees with the Australian Chamber of Commerce and Industry (ACCI) that the decision to abandon the $4.7 billion in company tax reductions and replace it with a $714 million loss carry back scheme has short changed business by $4 billion over four years.

Superannuation
VACC was also disappointed the Treasurer’s superannuation reforms failed to make it clear that employers will be hit with the increased 3 per cent superannuation contribution. VACC is not opposed to an increase in superannuation contributions, increasing from 9 per cent to 12 per cent, however, the absence of contributions from the mining tax or Government funding makes it inevitable that employers will have to provide the additional 3 per cent. This is unfair and if there is to be increased superannuation contributions, then employees themselves should have to make more contributions.

Luxury Car Tax
VACC was frustrated that the Treasurer failed to address the Luxury Car Tax. This is an inappropriate imposition on vehicle purchases and should be removed or, at the very least, the $57,466 threshold should be doubled. Many vehicles in this price range are family vehicles featuring important safety technologies. Many people would consider a luxury to be an indulgence which is exclusively available to the rich and famous, for example, a private jet or helicopter, yachts, jewellery, or works of art, and yet, these extravagances are not subjected to an additional tax.

Infrastructure
The future of Victoria’s East-West link was thrown into doubt following a lack of interest in the proposal by the Treasurer. A reduction in the Federal Government’s GST to Victoria by $453 million will restrict the Baillieu Government and impact on important transport and infrastructure projects. However, ongoing funding for road and rail projects and $13 million to fix accident black spots was appreciated.

Conclusion
“The Treasurer was so insistent on delivering a surplus forecast in the Federal Budget that he took his eye off the target. Generating small business confidence, supporting manufacturing and encouraging training, skills and trade apprenticeships are key areas the Treasurer should have made more provisions for. VACC’s member businesses need a stable economy in which they can operate, but stability does not have to mean a $1.5 billion surplus. Business can remain active in a well-managed economy and, given the global economic conditions, we would have preferred if the Treasurer had facilitated a competitive environment, rather than striving for a surplus”.