15 October 2009 Automotive Accountants' Forum

Automotive Accountants’ Network

ForumFor Accountants. By Accountants.

Maintain the Rage

15 October 2009

Presenter: Angelo Sirianni, Colledge’s

FOR ACCOUNTANTS,BY ACCOUNTANTS

COLLEDGE’S AUTOMOTIVE ACCOUNTANTS NETWORK FORUM

This presentation has been prepared by Colledge’s for the general information of its clients and seminar attendees. While the information herein has been prepared with all reasonable care and derived from sources believed to be accurate, no responsibility or liability is accepted by Colledge’s or any of its affiliations, for any errors or omissions including liability to any person of negligence or otherwise.

Recommendations may not be appropriate in all circumstances and clients must consider their own personal objectives and financial advice before acting on recommendations in this presentation.

Colledge’s (ABN 52 439 950 641)



Quote for the day

“Don’t do anything by half. If you love someone, love them with all your soul. When you go to work, work your ass off...”

Henry RollinsAuthor, Poet, Speaker, Musician





National Consumer CreditProtection Bill

Update

Refresher

• “Establish ... a single, standard, national law for the regulation of consumer credit” and better protection for consumers.

(ALP Media Statement, 25 June 2009)

• Aims to eliminate “unscrupulous and incompetent” lenders and increase standards in the (credit) industry.

• For the first time, credit providers will be regulated nationally rather than by differing state requirements.

National Consumer Credit Protection Bill



Refresher (cont)

• Strict and comprehensive licensing conditions.

• ASIC will be the sole regulator of “Australian Credit Licence” applications.

• Stricter penalties for misconduct (for lenders).

• Increased court assistance (for consumers).




Disclosure of Commission

The Bill requires lenders to inform consumers of the full credit proposal disclosure, including:

a) How much the broker receives for securing the loan;

b) All costs the consumer will have to pay to the broker, bank and others.




Recent developments

• Bill passed House of Reps on 20 August 2009.

• Introduced to Senate 7 September 2009.

• Senate moved start date back 6 months.

• ASIC indicates credit providers will now have the following timeline:

1 April to 30 June 2010 to be registered with ASIC by

1 July 2010, and

Applications for the Australian Credit Licence between 1 July to 31 December 2010.




Current Bill states:

“Exemptions from licensing point of sale retailers, such as car dealerships... where they engage in credit activities by arranging credit or acting as an intermediary through an arrangement with a lender.”

Media release of 14/8/09: National Consumer Credit Protection Package - Draft

Regulations

Exemption of “point of sale retailers” has reportedly been proposed so that the Government can understand this market before deciding how to regulate it. (Source ANZ)




Bill open for public consultation

• Colledge’s latest research has found a number of objections to Car Dealerships being exempt from the Bill as part of “point of sale” retailers.

• Published (on internet) letters from:

ANZ, Government & Regulatory Affairs

Indigenous Consumer Assistance Network (ICAN)

Commercial Asset Finance Brokers Association of Australia (CAFBA)




ANZ highlighted the following issues

•Car dealerships are more than referrers of finance.

•Will credit providers be made responsible for the conduct of car dealerships?

•Dealerships can act as a third party finance, therefore acting as a broker.

Will this activity require licensing?




ANZ issues (continued)

•Unlike other point of sale retailers, dealerships can:

Deal with more than 1 finance company.

Do not provide consumers with the advantage of subsidised rates or deferred payments.

Can receive commission/incentives from finance companies.




Issues raised by ICAN

Below issues come from actual cases ICAN provided advice and advocacy on for indigenous people

•Exploited consumers with minimal spoken English.

•Financing consumers who could not afford repayments

Borrowers from remote communities with higher costs of living (up to 20-30% higher).

•Inflating car prices over market value.

•Packaging loans with unnecessary extras such as insurance and warranties.




Issues raised by CAFBA

•Exemption of car dealers provides an unlevel playing field for credit providers and undermines the original intention of the Bill.

•Less protection for customers, namely youth and socially disadvantaged.

•No evidence that car dealers, who offer finance in 10s of thousands, need to be exempt.

•Should consider exempting point of sale financing under a certain $ amount.




Colledge’s will continue to research the Bill and keep you up-to-date on future information.




References•www.treasury.gov.au/consumercredit/content/default

•National Consumer Credit Protection Package, Draft Regulation: Media Release 14/8/09 by the Hon Chris Bowen MP

•Consumer Credit Reforms, Senate Amendments: Media Release 17/9/09 by the Hon Chris Bowen MP

•Indigenous Consumer Assistance Network Ltd: Submission to Senate Standing Committee on Economics, 17/7/09

•ANZ Government & Regulatory Affairs: Submission to Treasury 9/9/09

•Commercial Asset Finance Brokers Association of Australia Ltd: “A fair and more effective National Consumer Credit Protection Bill”, A submission to the Hon Chris Bowen MP 9/9/09




http://www.treasury.gov.au/consumercredit/content/default



Son of Holdback

• Currently “Stop the Clock” letters have been submitted.

• Quantifying the claim amount.

• Substantiate the claim amount – will follow.

• Court action pending.

Son of Holdback



Likely impact

• Approximately 8-10 times that of “Holdback”.

• Factory response unknown.

• Other court cases heard on GST.

Son of Holdback



What action?

• Contact your factory representative.

• Determine:

Their attitude.

Their level of assistance to quantify and substantiate the claim.

• Submit to ATO.

Son of Holdback





Son of HoldbackSpirit of Tasmania Case

Court Case:TT-Line Company Pty Ltd v Commission of

Taxation [2009] FCA658

Source: Blake Dawsonhttp://www.blakedawson.com/Templates/Publications/x_publications_landing_page.aspx?id=20141

http://www.blakedawson.com/Templates/Publications/x_publications_landing_page.aspx?id=20141

http://www.blakedawson.com/Templates/Publications/x_publications_landing_page.aspx?id=20141

Facts

• Passenger ferry that operates under the “Bass Straight Passenger Vehicle Equalisation Scheme”.

• Passengers, if eligible, are granted a rebate off the fair.

• The operator, TT-Line, claims the rebate.

Son of Holdback: Spirit of Tasmania Case



Issue

• Federal Court to decide whether the applicant is required to pay GST only.

1. In respect to amount it charges its customers, or

2. In respect to that amount, together with the amount of reimbursement paid by the Commonwealth under the Scheme.

• The Federal Court was required to consider whether the reimbursement is within the meaning of Section 9-15...




Decision

• The Federal Court held that the reimbursement is clearly

In connection with the supply of travel services to the eligible passenger, and

In response to or for the inducement of the supply to the eligible passenger.




Decision (cont)

• The Court stated that it does not matter that the supply of services is from, in part, the Commonwealth as a third party.

• The applicant (TT-Line) does not have to bear the burden of the GST, simply charge the customer the GST on full price of the fare inclusive of the rebate.




Overview

1. Reimbursement is “in connection with” supply.

2. Response to an inducement of the supply.

3. Does not matter that reimbursement is from a third party.

4. Can pass on the full GST to the customer.






Investment Allowance

Refresher

• Refer to presentation from 19 May 2009’s forum

• Investment in certain new assets.

• Applies to :

Small business – turnover < $2M

Large business – turnover > $2M




Small Business




Large Business




Contract periods

Contracts entered by*

30 June 2009 31 Dec 2009

Assets installed by30 June 200930 June 201031 December 2010

30% in 2008-9 30% in 2009-1010% in 2010-11

10% in 2009-1010% in 2010-11