When I worked in the outer south western suburbs of Sydney, there were colleagues who used to appear in a new car every second year or so. There was one in particular who had a new Audi TT, a Volvo SUV, and two others in between I can’t remember now. Many colleagues took up the opportunity to save on tax through leasing their personal cars on the novated lease program. The carpark had several gleaming, shiny new cars that had petrol and maintenance all part of the monthly package. These colleagues really loved the novated lease setup of which teachers could take advantage – though almost none of those cars were Australian built cars. European cars were pretty popular, followed by Japanese models.
One of the more absurd parts of the novated lease setup for these colleagues was that if they lived close to work, they had to take long driving holidays in order to clock up the kilometres needed to make the scheme work. Or lend the car to friends so they could clock up those kilometres. If the staff member lived an acceptable distance away from work, then it was ok – and certainly meant that catching a train was not an option. No point taking out the lease if you weren’t going to take full advantage.
I never took advantage of this scheme. Aside from never taking the time to fully understand what it was all about, I owned second hand cars because I really didn’t want to sink monthly money into new cars, whether there was maintenance and petrol or not. After my separation, it was also made clear to me I would not be under any taxation advantage if I was fiddling around with FBT. More importantly to me, however, was that I thought there was something drastically wrong with the whole thing.
I just did not see the fairness in a government giving what was in essence a tax cut to professionals wanting to sink money into a new car unnecessarily – what about those people who could not afford monthly novated lease payments and having to catch substandard public transport. It seemed to be just another piece of middle class welfare that encouraged car purchases and use above normal levels.
I could – and still can – see the use of novated leases for people using cars for work purposes, like mobile nurses, union organisers, sales representatives. But for people going to and from work and then ferrying kids to sport and so on? There was something terribly inequitable and environmentally irresponsible with the philosophy behind the scheme. Yet another way for governments to push people in the outer suburbs – the ones that could actually do the kilometres required – off trains and into cars.
So it’s come to pass that the Federal Government has decided to do the economically and environmentally responsible thing and cut the novated lease system to just people using their car for work purposes. The other cuts made due to the early switch to a floating carbon price – cutting environmentally important schemes – are poor moves in terms of long term, environmentally responsible action. However, this action could conceivably have a significant impact on the environment by cutting down on unnecessary uses of cars, apart from anything else. It also stops the taxpayer from subsidising shiny new cars for people who don’t really need them.
Predictably, the novated lease companies and car manufacturers have screamed that there will be “thousands” of jobs lost and the car industry will die in a screaming heap. The novated lease industry has not had these personal customers for all that many years. They will still have customers, just not the government subsidised personal ones. As for the Australian car industry, I can’t imagine them suffering as much as they are saying, especially as many who choose to lease a personal car choose imported vehicles, while government agencies and other massed work related leasing arrangements are still often done with Australian made vehicles. Any cursory look at ex-lease auction houses will show the acres of Falcons and Commodores from businesses that obtain work vehicles for their employees. I bought one of these vehicles once upon a time.
This may have an electoral backlash for Rudd and the Government in the outer suburbs amongst people who were taking advantage of this scheme. It shouldn’t affect their vote more than other actions, because the people taking out these pretty pricey novated leases are financially well off and don’t need to be having their car purchases being part of a tax benefit. For those who actually use their cars for their small businesses and for tradies, this shouldn’t make an impact, unless they are mixing business with pleasure at the expense to general revenue. This is why I hope that at least on this promise, Rudd and Bowen stick to their word and not buckle – it is one of the best things they have done in their short time.