VICTORIAN dealers have had a small victory in their battle with the state’s treasury department over what they term the is unfair application of stamp duty on vehicles used for demonstration purposes.
Fronted by the Victorian Automobile Chamber of Commerce (VACC), the dealers claim the duty is an imposition and, in many cases, payment is being forced on them after they had been pressured to register cars by their franchisor.
Further adding salt to the wound is the demand from the treasury department for a five-year claw-back, meaning dealers will have to expend considerable time and money to go back through five years of historic recordings.
This week the VACC and its 640 members of the Victorian Automobile Dealers Association (VADA) presented an additional request on Monday for intervention on the matter to the state treasurer Tim Pallas.
In response, the Victorian State Revenue Office (SRO) granted an extension on payment of the stamp duty on the dealer registration of demonstration cars to December 31, 2018. The previous deadline was September 30.
In a bulletin posted on its state government website, the SRO stated: “By voluntarily disclosing any incorrectly obtained duty exemptions by Monday 31 December 2018, LMCTs (licensed motor car traders) will reduce the amount of penalty tax payable to five per cent plus interest on any outstanding duty, from up to 90 per cent that would have been payable without a voluntary disclosure.”
VACC CEO Geoff Gwilym told GoAutoNews Premium he had argued that the advice given to dealers by the SRO was not clear enough for people to make an informed assessment of how and when the tax should be applied.
“We are asking the (Victorian) government to give the industry some breathing space to go back and review the materials from the SRO so that the definition of a demonstrator vehicle is clearer and also in keeping with the definitions of the other states,” he said.
Mr Gwilym said that in some states, demonstrator vehicles can include those that are used for other purposes, such as loan vehicles and service vehicles.
“This is not the case in Victoria, which has very strict rules. The VACC thinks this is unfair,” he said.
“On top of that, the SRO wants a five-year claw-back. To go to the market – a market that is under intense pressure from other areas – and say to dealers to itemise vehicles over the past five years is ridiculous.
“We have appealed to (treasurer) Mr (Tim) Pallas on this, and he has listened, and he is conscious of the difficulties in the industry.
“But I don’t think the government fully understands the full impact around market failure in some dealerships and their future capacity to employ people.”
Mr Gwilym said one of the reasons for the issue becoming so pronounced was attributed to current arguments against OEMs demanding dealers take additional stock to register vehicles to boost sales numbers. As GoAutoNews Premium has reported, the term for these unsold vehicles is cyber cars.
“It all comes back – largely – from too many vehicles being dumped by a manufacturer on the dealers and who has to register those vehicles,” he said.
“These cars become the dealerships’ demonstrators before sale to consumers, but the dealer has to pay stamp duty.
“We argue that a vehicle – even a loan car – is a demonstrator vehicle because it is for sale. The loan car demonstrates its features to the driver who may buy that vehicle.
“Our view is that, because of this, the vehicle is for sale. The SRO has a contrary view, saying it is not a demonstrator and stamp duty must be paid. We disagree.”
Mr Gwilym said general market compression, and a failure by the SRO to understand that the business model applied between OEMs and dealers is very different today than in 2006 when the current rules for stamp duty on vehicles were written, have had an impact.
“Dealerships have all sorts of pressures to take bulk vehicles from manufacturers and then they are expected to pay stamp duty on those vehicles,” he said.
“They didn’t even want many of those vehicles. Then they have to go into a cycle of dropping the price on the vehicle to sell it.
“The second issue is that when the dealer pays the stamp duty and then sells that vehicle a week or two – or longer – later, then the buyer pays stamp duty again.
“It’s a free kick for the government. Meanwhile, it places huge pressure on the industry where margins are dropping continually.
“It is a situation that can eventually affect margins so much that it will simply send some dealers broke.
“They will not be able to continue to operate in these market conditions.”
Mr Gwilym said the VACC had some sympathies within government “but not enough it seems to get changed at the moment”.
“We are warning government that without change, and with penalties being imposed on dealerships where they made a judgement call on whether a vehicle falls into the category of having to pay stamp duty or not, then some may pay a high price for that and unfairly so,” he said.
By Neil Dowling