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Fumbling the FTC – transport companies on the brink of disaster

Transport operators all of sizes are still coming to terms with the lack of a fuel tax credit. Industry members say urgent action is required to prevent more businesses from closing and disrupting the supply chain.

It’s been a bleak few months for Phil Benger. The transport operator has been through soaring fuel prices before – he recalls maxing out credit cards at the turn of the century when prices last rose exponentially. It took him three years to recover his debts. Now it all feels like déjà vu.

“The same thing is happening now,” Benger told ATN. “All of my cards are maxed out again and my partner has had to dip into super to pay for maintenance on my truck.

“The trouble is I’m in my 60s now and I don’t have that much time to recover.”

Benger, like many small operators across Australia currently, is stuck in between a rock and a hard place. He has to keep working just to pay his bills and recover money, but while working the rising fuel costs has only created more bills. Benger knows many other companies who have already walked off and filed for bankruptcy. But for him it’s not an option.

It’s the harrowing reality for many operators who are slowly spiralling into more debt. On March 30 the old coalition federal government announced it would slash the 44 cents per litre fuel excise for all road vehicles to cope with the growing price of fuel and the exorbitant cost of living expenses. But while doing that they subtly took away the transport company’s fuel tax rebate credit (FTC) that provides a rebate of around 17.8 cents per litre that operators can claim back quarterly.

Now, even the return of the FTC won’t erase Benger’s debts. When meeting with his accountants, Benger says even they didn’t know about the impact the FTC’s removal was having on his business. His only solution is for the fuel prices to drop back to normal rates.

“It won’t make a massive difference,” Benger said. “My fuel bill has risen from around $2,700 a month for a 10-pellat truck eight months ago to well over $5,000 currently.

“If our credit comes back then the fuel price will still be over $1.85 per litre or more and that’s enough to hurt small operators like me.”

Until this happens, Benger can only hope to get by. Being a sub-contractor in the transport business, he has barely any super to dip into. Until higher action is taken to reduce the hit on transport operators, Benger has to sit and cross his fingers that his biggest expense in fuel drops soon.

Yet this FTC rebate issue isn’t just a small operator problem. Freight forwarding service Diamond Bros CEO Kym McDermid is in a tricky spot.

By no means a small transport operator, the South Australian-based company is still reeling from the lack of a fuel tax rebate credit. Every day he hears of more and more small trucking businesses closing down operations and selling their small fleet of vehicles.

“A lot of people tell me they’re selling their trucks and getting out,” McDermid told ATN. “They say they were already struggling to make money before the fuel tax credit was taken away and now they have no chance of surviving and no options.”

The federal government is yet to reinstate the FTC rebate. McDermid has spent the past two months explaining to angry customers why his company can’t lower freight costs to match the fuel price drop seen at Australian service stations.

“It’s so frustrating,” McDermid said. “Now we’ve been having arguments with customers and the fuel levy, as they expect a 22 cent per litre decrease in their costs when in reality we’ve only had a price drop in operations of around 3.4 cents per litre.

“You can’t blame the customer for not understanding as it’s a complicated situation. When the government announced it they made it sound all positive but in effect it’s only inflated our costs further.”

Diamond Bros’ Kym McDermid

Since the removal of the FTC, McDermid says he’s only encountered one “quite smart” customer who called the Diamond Bros CEO and understood what had happened. But all of McDermid’s other customers struggled to comprehend why a nation-wide decrease of fuel prices wasn’t leading to a drop in freight service costs. It’s led to a frustrating few months for transport operators as they continue bargaining with customers to ensure the mounting debt isn’t completely placed on their own company’s shoulders.

McDermid says he’s fortunate that Diamond Bros is a relatively large company that deals with multi-national customers, meaning he has enough cash flow still to survive. But he feels for the many small operators in Australia who are currently bleeding money due to the removal of the FTC and have been forced into difficult decisions.

“We can’t live as an industry without the small operators,” McDermid said. “There’s around 47,000 transport companies in Australia and only four per cent of them have more than 10 trucks.

“In terms of companies being wiped out by this, there’s a lot of small operators being decimated.”

Since the FTC was removed in March, the lack of a rebate is only compounding each month. McDermid can see the crippling impact that no cash flow is having on operators in South Australia.

So can South Australian Road Transport Association (SARTA) CEO Steve Shearer. He was already nominated as a spokesperson to lead the charge against the FTC’s removal with the old federal government and is now taking action to underline the severity of the issue to the new Labor government.

Shearer says the issue is only worsening for transport operators across the country by the day.

“As each day goes by the reality is for operators that their business activity statement (BAS) liability is growing,” Shearer told ATN. “I believe there’s still a significant chunk of the sector that doesn’t know about this and will get the biggest shock come July 1.”

“Every week I’m hearing of businesses closing their doors.”

Each quarter transport operators pay their BAS. Usually, the FTC is factored into these costs and removes a part of the amount that they have to pay back. For those who rely on the FTC reducing their bills, costs will increase significantly when they make their next BAS payment on July 1.

Shearer has moved to alert the new government to this issue. He recently created a survey to provide evidence to the Labor party of the crippling impact that the FTC’s removal is having on operators large and small in Australia. The results weren’t pretty.

Shearer says eight per cent of operators, which is roughly 3,500 businesses nation-wide, won’t survive if the FTC isn’t restored by July 1. If the rebate still isn’t returned by the next BAS payment date on September 30, then just under 60 per cent of transport companies will have to shut their doors. While Shearer now looks to present these findings to recently crowned transport minister Catherine King, he can only imagine the detrimental ripple effect that these closures will have on Australia.

“We saw during COVID how reliant everyone is on a safe trucking industry,” Shearer said. “When we had just a week of disruptions we saw shop shelves going empty and no toilet paper.

“Now imagine if it goes for not just a week but for months on end, like this would do. It could go on for six months before market balance gets restored.”

It’s enough to scare anyone, not just transport operators who are feeling the direct pain of the rising fuel prices. Shearer can only hope taking the survey results to King’s office will help restore the FTC. In an industry where money is being stretched tight, he says it’s the operator’s money.

“The FTC is our money,” he said. “It’s built into our business plan because we know it’s money that we’re due.

“Without any warning it was taken away. Normally one may call it breaking and entering. We need it back before it’s too late.”

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