THE federal government has answered calls from the automotive industry for assistance in a depressed economy that has been further eroded by the effects of the COVID-19 virus.

Federal Chamber of Automotive Industries (FCAI) CEO Tony Weber said the industry “was in the midst of a prolonged downturn”.

“Sales of new cars have contracted for 23 straight months, representing a sustained recession and a situation significantly worse than the GFC which saw 15 months of decline,” Mr Weber said.

“The 2019 calendar year saw new-car sales down 7.8 per cent, the largest annual reduction in sales since recordkeeping started nearly 30 years ago.”

Australian Automotive Dealer Association (AADA) CEO James Voortman said the industry was “in urgent need of assistance”.

He said falling car sales had already forced many of the nation’s 3200 new-car dealerships to lay off staff, and that some dealers, particularly in regional Australia, have been forced to close their doors.

“Many dealerships are at breaking point and if the situation persists there will be severe consequences for these businesses and the people they employ,” Mr Voortman said.

Helping alleviate the situation, the federal government last week announced:

• $700 million to increase the instant asset write-off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500m (up from $50m) until June 30, 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.
• $3.2 billion to back business investment by providing a time-limited 15-month investment incentive (through to June 30, 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500m will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.
• $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to nine months from January 1, 2020 to September 30, 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Mr Voortman welcomed the measures, saying dealers were hopeful they would “breathe some life into an industry that is on the ropes”.

“The expanded instant asset write-off is most welcome and will allow many more businesses to make use of the scheme to invest in a much larger range of vehicles,” he said.

“This measure will run until 30 June and I urge businesses to make use of this scheme to purchase a vehicle from their local dealer.”

The federal government statement said these measure start from March 10, 2020 and aim to support more than 3.5 million businesses (representing over 99 per cent of businesses) employing more than 9.7 million employees or three in every four workers.

“The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term,” the government release said.

“There is also cashflow assistance to businesses including $6.7 billion to boost cashflow for employers by up to $25,000 with a minimum payment of $2000 for eligible small and medium-sized businesses.

“The payment will provide cashflow support to businesses with a turnover of less than $50 million that employ staff, between January 1, 2020 and June 30, 2020. The payment will be tax free.

“This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.”

Mr Voortman said the current downturn could not be underemphasised and he urged the government to extend the instant asset write-off beyond June 30 and to consider additional measures to encourage consumers to purchase new cars.

“Similarly, while we welcome the announcement of a time-limited 15-month investment incentive, the downturn in our industry means investment programs will likely remain subdued,” he said.

In addition, the AADA is urging all state governments to follow the lead of the federal government and adopt stimulatory measures.

“Stamp duty exemptions on the sale of new cars would facilitate renewal of the fleet, leading to safer, cleaner and more efficient vehicles,” Mr Voortman said.

“Dealers have high turnovers due to the high value of their products, but profit margins are incredibly slim at less than one percentage point.

“Due to these higher turnovers dealers have missed out on some of benefits announced for smaller businesses. We would urge the government to consider our unique circumstances,” he said.

By Neil Dowling