Thursday, January 07, 2010

"I run a business, I've got to buy a car"

That's how it was at the end of last year

A last-minute rush to take advantage of the government's 50 per cent business investment tax break propelled new car sales to an all-time high in December with a record 88,700 vehicles walking off lots.

Total December sales were up 16 per cent on the previous year as a 44 per cent jump in sales to business buyers more than offset a 14 per cent slide in sales to governments and roughly steady private sales.

The range of vehicles acquired by businesses in the last weeks of frantic buying extended beyond those normally thought of as investment purchases.

While business purchases of light commercial vehicles jumped 70 per cent business purchases of four-wheel drives jumped 73 per cent... and business purchases of passenger cars 19 per cent.

The Small Business and General Business Tax Break was introduced as a recession-fighting measure in December 2008 and extended to December 2009 in the May Budget. It allowed small businesses to write of 50 per cent of the cost of plant and equipment purchases in addition to the usual depreciation and large businesses 30 per cent.

Although budgeted at a cost of $3.7 billion the true cost will not be known until businesses put in their tax returns.

While Tax office promotional material referred to spending on items such as computers, ovens for bakeries and two-way radios, the motor vehicle industry appears to have been the biggest beneficiary.

"This was game-changing. It restored confidence in the marketplace and stimulated additional demand," said Federal Chamber of Automotive Industries chief executive Andrew McKellar.

"Sales for the year surpassed our original expectations by 57,000 vehicles." Asked how much of the outperformance would have been due to the investment tax break he replied "most".

Treasurer Wayne Swan welcomed what he said had been a "massive impact on car sales," but said the tax break supported more than the car industry.

"That was one part of it. It has supported small business to invest in new equipment across the board – restaurants to buy new equipment, farmers to buy new on-farm equipment. Across the board it provided vital support at a time when it was needed and the global recession was at its most savage."

Introduced with bipartisan support the tax break defined eligible businesses widely allowing "an individual who generates personal services income but is not a personal services business" to claim the deduction. For many such individuals buying a new car would have been the biggest and easiest way to take advantage of the deduction.

Toyota was the biggest selling brand for the seventh year running accounting for one in every five new cars sold. Holden and Ford remained in second and third place. The most popular model remained the Holden Commodore.

Four-wheel drives, also know as SUVs accounted for a record 20 per cent of the new cars sold during 2009, up from 19 per cent in 2008. Sales of Australian-made cars slid from 171,400 to 147,700.

Mr McKellar said the industry expected to exceed its 2009 sales total of 937,300 in 2010. The cut in tariffs from 10 per cent to 5 per cent on January 1 should stimulate demand by cutting the price of imported vehicles. He expected sales of Australian made vehicles to continue to sell well.

The cars businesses bought

Light commercial vehicles up 70%
Four-wheel Drives (SUVs) up 73%
Passenger vehicles up 19%

Total sales to businesses up 44%

Sales to private buyers down 0.4%
Sales to governments down 14%

VFACTS, December 2009 compared with December 2008

Published in today's SMH and Age

Related Posts

. New car sales off a cliff

. Swan delivers... stimulus

. Baby you can drive my car...