Manufacturers raise depreciation allowance concerns

Date: 26.05.2011

Manufacturers raise concerns over the Federal Government's timing for the introduction of a vehicle depreciation allowance

By Gary Worrall | May 26, 2011

The Federal Government’s plan to give small business owners an instant $5,000 depreciation allowance on new vehicle purchases has met with a lukewarm reception from vehicle manufacturers.

While all manufacturers welcomed the initial announcement outlined in the Federal Budget earlier this month, news that it would only take effect from July 1 2012 had some scratching their heads.

Mercedes-Benz Asia Pacific communications manager David McCarthy has questioned why the allowance is being delayed for one year.

"Do they have a better crystal ball than the rest of us?" he says.

With the vehicle market still struggling to return to pre-GFC levels, McCarthy says there are worries within Mercedes-Benz over the impact of the allowance.

"We welcome any measure that assists small business, but why not make it $2,500 this year and then a further $2,500 in 2012-2013. It is the same benefit but it applies faster," he says.

Hino Motor Sales Australia marketing manager Paul Tuffy says the company supports the allowance but that it should be brought forward.

"All sales statistics are down. I think the economy is still pretty quiet but there is also a result of the previous investment allowance," Tuffy says.

He says there are "pretty big spikes" in the Truck Industry Council reports for June and December 2010, the two months when the previous allowance required vehicles to be delivered to qualify under the scheme.

"It did cause a pull-forward effect in the figures. It really stands out when you compare months," he says.

Tuffy says introducing the allowance sooner is "far more preferable" than waiting another year because it will give all levels of industry a boost by creating a knock-on effect.

Hyundai Motor Corporation Australia took a similar stance in welcoming the move, saying it supports "any policies which promote the support of small business".

When asked if the allowance should take effect earlier than 2012, a Hyundai spokesman was more guarded, saying it was an area of fiscal policy and it should be "carefully considered" by the government.

Renault Australia Managing Director Justin Hocevar labelled the depreciation allowance a "positive move" to improve the lot of small business.

Hocevar also says the move will have environmental benefits by introducing vehicles that are "modern, economical and environmentally friendly".