HAIL storms and flooding have damaged an estimated 50,000 dealer and private vehicles with some estimates of perhaps close to 10,000 vehicles damaged in Canberra alone.

The industry is now faced with an unprecedented level of repair, replacement and sales activity in the wake of the storm that spread from the Gold Coast down to Melbourne and inland to Canberra. The bill is said to be around $1 billion; a healthy injection for the repair and retail industry that will be largely funded from insurance reserves.

The Australian Automotive Dealer Association (AADA) said the size of the natural disaster was yet to be fully assessed.

AADA CEO James Voortman, based in Canberra, said he was aware of significant damage in the ACT, especially in Belconnen – where one large dealership may have 300 damaged vehicles – and Fyshwick.

“It is an extensive loss, with hundreds of vehicles affected and we are yet to know the level of cover for these vehicles,” he said.

“This will severely affect many dealerships and I hope that the OEMs take this into consideration when setting sales targets.”

Meanwhile, KPMG national lead of Motor Industry Services, Steven Bragg, told GoAutoNews Premium that there are things affected dealers need to know.

He said hail-insured cars needed to be assessed on a timely basis.

“Normally the assessor will identify the cars damaged as category A, B or C depending on the level of damage,” he said.

“The A, B and C categories are then assigned a standard value claim per car in the stock listings for the overall claim.

“It is important that the dealer be careful of public expectations and media hype surrounding the value of the hail damage discount. This can work in your favour; however, it can also be detrimental to potential gross margins.

“Sales staff should not abandon the ‘road to a sale’. They should build value in hail-damage cars and not merely offer a steep discount to get the sale.

“Some hail insurance policies are capped at a maximum value for the claim. Unfortunately, the A, B and C formula claim value noted above may be higher than your maximum cap and therefore the claim may be adjusted down to the lower capped claim value.

“The capped claim value may present significant cashflow issues for dealers that have damage to their vehicle stock in excess of the insurance claim.”

Mr Bragg said while hail damage was the immediate concern, some insurance policies also allow for a business interruption claim.

“This is a loss of trading income for the dealership associated with the storm including loss of power, communication lines, computer servers or even stock shortages caused by the knock-on effects of the storm damage,” he said.

“It is important to take time to review the policy to ensure you’re covered and claim everything available under the policy.

“You may need to seek specialist advice. There may be specific formulas applied by insurance companies which will require your unique sales and/or gross data to be entered.

“Some insurance companies require the claim submission to be verified by a third party which may add time to the process.”

Mr Bragg also said dealers must check with their franchise OEM or distributor about manufacturer warranty on new cars that have been damaged by hail.

“Dealers will be obliged to obtain a disclaimer or acknowledgement from customers that the car was hail-damaged,” he said.

“They will not then claim rectification work under warranty for the hail damage or any further damage incurred on the car at a later date that may stem from the hail damage.

“Remember to be aware that stamp duty in Victoria and the ACT is assessed on the vehicle’s dutiable value. This is the purchase price or the vehicle’s market value – whichever is higher.

“In NSW, it’s assessed on the sale price or market value, whichever is higher.

“In the past, when significant hail events have occurred, the state’s revenue office made exceptions for hail-damaged vehicles under natural disaster relief to have the vehicles assessed at market value. Dealers should contact their local MTA office to lobby the relevant state revenue office for relief.”

There are other useful aids when confronted with a natural disaster. Mr Bragg said relief for businesses and individuals affected by natural disasters are listed in the Australian Taxation Office’s website and stipulated by tax legislation.

“Hence, some dealerships may qualify for deferral of certain tax payments,” Mr Bragg said.

“Please contact KPMG if you would like further information.”

In addition to the vehicle damage, there may be delays in getting vehicles repaired.

Mr Bragg said used car and panel repair markets may take some time to work through and recover from these events.

“Canberra alone has about 11,000 vehicles damaged,” he said.

“The decision to repair versus write off large numbers of hail-damaged vehicles would normally affect the used-car market,” he said.

There are also tax considerations. Mr Bragg said if a new car is damaged by hail, then it is allowed to be sold as a used car.

“The luxury car tax (LCT) would still apply even though it’s being sold as a used vehicle as the LCT has not been previously paid on the vehicle and therefore not exempt,” he said.

“If a hail-damaged used car is assessed as a write-off, the input tax credits are not able to be claimed back in your BAS. This is because most insurance claims are paid exclusive of GST.

“Damaged new or used cars still on hand at June 30, 2020 will require special treatment for income tax purposes.

“If you have any remaining vehicles in stock at year end, they will need to be identified so that your tax advisor can assist in the appropriate treatment for income tax purposes,” Mr Bragg said.

Allianz Australia Insurance, the main insurer of hail damage, said its thoughts are with the affected communities as they start to recover from the storms.

In a statement, Allianz corporate communications specialist Georgina Adcock said that in the wake of the storms its team had helped more than 4400 affected customers to lodge claims, with a total value of more than $30.3 million.

“The storms impacted Queensland, New South Wales, Victoria and the ACT. The ACT has been the worst hit, with almost 3000 claims being made with a total incurred value of $19.8 million,” Ms Adcock told GoAutoNews Premium.

“We expect more customers to lodge claims and we are ready to resolve claims as soon as possible.

“Providing immediate support and access to emergency payments is our utmost priority. Our teams are available to answer any questions customers have about their policy and the claims process via our claims line on 131013 or www.allianzclaims.com.au.”

The company is one of the few insurers that insure to the full value.

Asked about potential premium increases because of the recent storms, Ms Adcock said “premiums were an outcome of expected claims costs and expenses associated with the specific portfolio”.

“These are assessed on a regular basis and adjusted as required,” she said.

“Allianz has no cap on its claim payments and we are one of the few insurers in the market that insure the full value.”

By Neil Dowling