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VICTORIAN dealers must have access to government relief packages to be able to trade, collect taxes, employ people and contribute to their local communities, said the state’s peak automotive industry body as part of a push to rectify what it believes is an unfair threshold that excludes many dealerships from aid.

The Victorian Automobile Chamber of Commerce (VACC) has called out to the state government for an exemption from turnover and employment level thresholds that it said would cripple auto businesses.

The call is parallel to the submission made to the federal government this week by the VACC and the Motor Trades Association of Australia (MTAA) on how businesses were being crippled because of inflexible turnover-based thresholds.

Within its submission, the VACC and the Victorian Automobile Dealers Association (VADA) noted that the combined effects of the virus, tight finance regulations and a falling new-car sales environment had sent the car market “in freefall” with dealers being cash poor and struggling to meet weekly payroll obligations, resulting in reduced staff levels.

In its notice to Spring Street, the VACC requested that the Victorian government:

  1. Exempts automotive franchise dealers and all licenced motor car traders (LMCT) from the $3 million annual wage threshold to enable those businesses to have their payroll tax for the 2019/20 financial year waived, be eligible for future payroll tax deferrals and refund of payroll tax already remitted.
  1. Exempts all automotive dealers and LMCTs from the payroll criteria of less than $650,000 applied to the government’s Business Support Fund.
  1. Exempts all automotive dealers and LMCTs from the turnover threshold criteria associated with the Victorian government’s Rent Assistance SME Commercial Leasing Principles during COVID-19.
  1. Extends the land tax deferral and 25 per cent land tax refund to all automotive dealers and LMCTs.
  1. Assists LMCTs in the sale of vehicles by introducing legislation that will allow for LMCTs to consign a vehicle from members of the public.
  1. Assists LMCTs and fleet owners (eg car rental) by allowing for a voluntary suspension of vehicle registration for a three-month period for the period April to August 2020.
  1. Abolishes the ‘Super Luxury Vehicle Duty’.

The chamber said: “The COVID-19 crisis is impacting on all dealerships and across a range of the corporate structures.

“With large payrolls, dealerships are struggling to maintain employment levels and are not reinvesting into their businesses in the immediate to short-term.

“The impact is being felt from single-car dealership franchisees through to the multinational companies which have dealership holdings in every state and territory.”

The VACC published two case studies showing the effect of external conditions on the industry that comes on top of the devastating effect of the COVID-19 pandemic.

Case study 1: In September 2019, listed dealer group AP Eagers Ltd had an estimated market capitalisation of about $3 billion. On April 17, its market capitalisation was $1.01 billion. Its shares listed on the Australian Securities Exchange (ASX) peaked at $14.49. Those shares fell to a low of $2.70 in late March 2020 and are currently trading on the ASX at $3.54 (April 24, 2020).

Case study 2: In September 2019, listed dealer group Autosports Group Ltd (ASG) had an estimated market capitalisation of about $352 million. ASX advises that on April 17, 2020, the market capitalisation for ASG was $148.74 million. Its shares listed on the ASX peaked at $1.84 in November 2019 and are currently trading at $0.73 (April 24, 2020).

The notice to the Victorian government also brought up the problem with aggregated turnover rules, which include all business entities into one to calculate the aggregated turnover of a business. Government relief packages are based on this aggregated turnover.

The VACC said that it would not normally contest the rulings of the organisations responsible for business financials – the Australian Taxation Office, ASIC, Victorian State Revenue Office and so on – but, given the hit from the COVID-19 crisis and “deplorable” automotive trading conditions, the current enactment of the threshold criteria and rules is considered “perverse”.

“The VACC’s view is it should not apply to this sector for the purposes of government-sourced COVID-19 relief packages,” the chamber said in its notice to the Victorian government.

In its COVID-19 Dealership Impact Survey, conducted by VADA from March 16 to April 15, the VACC found that three major dealer groups would not qualify for five of the six available relief packages directly as a result of having an aggregated turnover of the entity of more than $50 million and staff levels of more than 20.

“The average turnover per dealership, all of which operate under different ABN numbers and have separate licences under the Victorian Motor Car Traders Act (1986), have annual individual dealership turnovers less than the threshold amount,” the chamber said.

“As a result, many have begun standing down or terminating staff.”

VADA members have reported a reduction in staff levels from a benchmark aggregate of 2702 staff (March 16) to a total of 2005 staff on April 15, 2020.

“That is a decrease of 28.9 per cent in 30 days,” the VACC said.

“The fallout for dealers in regional Victoria is along a similar trajectory, with regional dealers reporting a 27.8 per cent reduction in staff.

“Whilst JobKeeper is a very welcome initiative by government, it is a reimbursement subsidy, meaning dealers who are still cash poor are facing an uphill battle to access a line of credit that will allow for them to pay staff wages in the first instance.”

The economic stimulus packages announced by the prime minister and federal treasurer to date have a number of components including:

  • Supporting business capital investment through enhanced tax concessions.
  • Cashflow assistance for small and medium-sized businesses as well as not-for-profits (NFPs) to help them stay in business and keep their employees in jobs.
  • Targeted support for the most severely affected sectors, regions and communities.

“It is VACC’s view that the automotive dealer network is a severely affected sector, with the impact in metropolitan and regional Victoria as pronounced as each other,” the chamber said.

By Neil Dowling

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