28 july 2009 automotive accountants' forum

Automotive Accountants’ Network

ForumFor Accountants. By Accountants.

Is this growth?

28 July 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

“If we are going to carry on growing, and we will, because no country is going to forfeit its right to economic growth, we have to find a way of doing it sustainably.”

Tony Blair, former British Prime Minister





Vehicle Industry

Summary

• Market forecasts 2009

• Winners

• Losers

• Industry matters

Vehicle Industry Summary



The Economy

• Interest rates

• RBA forecasts

Cash rate

Inflation

Consumer confidence

• Overall cash flow




Market forecasts

• 2009: 830,000 to 925,000

• First half: 455,223

Down 16% on 2008

Stimulus package: 102,847 in June 2009

• Second half: Similar to first half

Tax incentives for SMEs to 31 December 2009




Winners

• Holden

• Mazda

• Hyundai

• Nissan

• Kia

• Mercedes

• Peugeot




Losers

• Toyota

• Mitsubishi

• Honda

• Suzuki

• BMW

• Isuzu

• Lexus




Industry matters

• Volkswagen and Porsche

• GM

• Ford

• Hyundai






The Economy & Finance

• Government sponsored SPV

Was $2 Billion

Was $800,000

Now zero

• How many dealers received assistance?




Finance companies

• Margins were 1.75 to 2%, now 3-5%

• GE continues funding dealers

• Capital Finance: Review of all senior positions

• Ford Credit only doing bailment – no retail

• ANZ takes over Esanda




• Westpac and St George merger

New automotive business for Westpac after the AGC problems some years ago

• Funding of car dealers

Stricter limits on bailment / floor plan

Money easing for retail paper

• Importers pricing forecasts

$A at 80+ cents – good to maintain current pricing




RBA Forecasts

• Forecasts no change in RBA cash rate of 3% until early 2010

• Inflation RBA target for 2009 at 1.5%

• Consumer confidence index okay

Housing up Clearance rate 80+%

Retail up The Harvey Norman index

Car market up Stimulus package to 31/12/09

• Unemployment : Forecasts to over 8%, now a lot lower




Cash Flow

• Banks/Finance companies competing with government for funds

• Higher borrowing costs

• Banks cashed up?




Interest rates

• Cash rate RBA 3.00%

• BBR 90 day price 3.19%

• 10 year rate (around) 5.7%




Banks

• Investment rates on deposit funds to:

$4.54 at call for personal

$2.75 at call for business

$3.05 at call for super funds




Lending rates

House average around 5.5%

Equity access around 6.0%

Investment property 5.75%

Personal loans (unsecured) and overdrafts

11 – 13.7%

Credit cards 12.55 - 16.27%






Global & Australian Economic Outlook

Reference:Article: Polygenis, R. “Australian Economic Outlook”, ANZ Economic Outlook, July 2009

Global overview

• The worst seems to be over

• Recovery will be slow

• Global manufacturing has bottomed

• Production rebounded in Asia

Global & Australian Outlook



Risks

• Production increases not yet felt in the USA/Europe

• Policies to stimulate demand may not be sustainable

• Consumer demand has not shown signs of substantial recovery




Australia

• Managed to circumvent the “GFC”

• Only advanced economy to avoid 2 quarters of negative growth

• Businesses have adjusted their behaviour to ensure financial resistance




Australia – Business Conditions

• Business credit has contracted by 5%, six months to May 2009

• Business investment to be a significant drag

• 17% fall in investment in 2009-10

• Government infrastructure spending to fill the gap




Australia – Housing

• Household disposable income has risen by 6% to March 2009

Low mortgage repayments

Government stimulus package

• Sharp turn-around in housing finance approvals over 20%

First home buyers' grants (38% of new approvals)

Lower interest rates




Australia – Housing

• Concerns over first time home buyers over extending

• Median house price has fallen by 4-5%

• However, has strengthened from the month of March

• Weakness in the upper level




Employment

• Will be the key

• Growth has ground to a halt

• Business is hoarding labour

• A shift towards shorter hours – due to recent skills shortages

Hours worked fell by 2.1%

Increase in part-time employment +72,600

Decrease in full-time employment - 83,100




Risks to Employment

• Decrease of hours can only go so far

• All forward looking indicators point to unemployment to be as pronounced as in previous recessions

• High risk in retail/hospitality – account for 18% of total employment

• ANZ forecasts unemployment to be 8% by mid 2010

• Currently at 5.7% (May 2009)






National Consumer CreditProtection Bill

References:National consumer credit protection reform, Media Statement, 25 June 2009, Minister of Financial Services, Superannuation and Corporate Law, Chris Bowen MP http://alp.org.au/media/0609/mscca250.php The National Consumer Credit Protection Bill 2009, http://www.treasury.gov.au/consumercredit/content/downloads/Consumer_Credit_Brochure.pdf Article: Oakes, D. New credit laws to strengthen consumer rights, The Age, 25 June 2009

http://alp.org.au/media/0609/mscca250.php

http://www.treasury.gov.au/consumercredit/content/downloads/Consumer_Credit_Brochure.pdf

http://www.treasury.gov.au/consumercredit/content/downloads/Consumer_Credit_Brochure.pdf

• Proposed Act to “establish ... a single, standard, national law for the regulation of consumer credit” and better protection for consumers. (ALP Media Statement, 25 June 2009)

• Bill was introduced and read in House of Representatives on 25 June 2009

• Referred to Committee in Senate

National Consumer Credit Protection Bill



• The Bill is ‘Phase 1’ of 2008 agreement with COAG (Council of Australian Governments)

Commonwealth to be responsible for consumer credit regulation.

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




• ASIC will be the sole regulator.

• Lenders have until 31 December 2009 to register for a licence.

• Strict and comprehensive licensing conditions.

• Licensees will not be allowed to give credit to consumers who cannot afford repayments.

• 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; and




But, you may not have to panic just yet...




• The initial, proposed legislation was amended on 25 June 2009 after consultation with industries.

• Car dealerships (as ‘point-of-sale’ retailers) “...will be exempt from the requirements that facilitate assistance to consumers. The Government will examine the issues of regulatory oversight within the next 12 months”. (National Consumer Credit Protection Reform: Media Statement, 25 June 2009, Chris Bowen MP)




Colledge’s will keep a close eye on the Bill and will alert you of future information.






Son of Holdback

Current Situation

• Extension of GST on Holdback refund

• Test case currently being prepared

• ATO keen to have the issue tested

• Issue still unclear

Son of Holdback



Issues to consider ATO Interpretive Decision

ATO ID 2008/166, 17 December 2008 Provide background on payments other

than “holdback”e.g. Fleet, margin support, discretionary payments

Defines what is a supply Defines what constitutes a supply between

a manufacturer and dealer

Son of Holdback



Scope

• All factory incentives including:

Fleet claims

FBT reimbursement

Annual, quarterly, monthly bonuses

Demo bonuses

Subsidies

Son of Holdback



Factory incentives (continued)

Target incentives

Parts obsolescence payments

Advertising reimbursement

Run out bonuses

Warranty?

Son of Holdback



• The size of refund if successful

• Is likely to be more than the Holdback refund

Son of Holdback



Stop the Clock letters

• Action may take some time

• Not clear if successful

• Need to be in it

• Issue regarding 'stop the clock'

• 90 days to quantify the claim

Son of Holdback



Timing

• Section 105-65 (1) Restriction of GST refunds

• Effective 1 July 2008

• Negates any windfall gain

• Claims relating to GST refunds post 1 July 2008 may not result in a refund

Son of Holdback



• Therefore the period prior to 1 July 2008 as the review period

• Four year rule applies

From 30 June 2005 to 30 June 2008

• If 'stop the clock' letters lodged prior to 30 June 2008, the period may be

1 July 2000 to 30 June 2008

Son of Holdback



Why lodge “Stop the Clock”?

• Need to be in it

• Subject to a test case

• Some value (in it)

Son of Holdback



Process

• Lodge “Stop the Clock”

• 90 days to quantify claim

• ATO will reject the claim

• Lodge objection within 60 days

Issue unresolved

Subject to a court challenge

Son of Holdback



Process

• ATO will hold the claim in abeyance, subject to the test case

• ATO insist on a quantified claim

• Must be a substantial claim

• Within 90 days of lodging 'stop the clock'

Son of Holdback



Issues to consider

1. Results of the test case

2. Meet the 90 day timeframe

3. Substantiate the claims

4. Factory action, if any?

Son of Holdback





Police Checks

• Is there an easier and timely way of obtaining a Police Check?

• Should take no more than six weeks

• Some instances taking up to 12 weeks

• What are members of the forum doing?



Police Checks



Record keeping requirements:

Salespersons’ hours

• VACC has sought advice from the Workplace Ombudsman

• Compliance with the pay slip/record keeping obligations under the Act.

Three payslips submitted

1.Retainer at award rates – offsetting required

2.Retainer marginally over award rates – offsetting required

3.Retainer well over award rate – no offsetting required



Record Keeping – Salespersons Hours

• Advice from the Ombudsman – sample pay slips comply

• If there is a short fall of commission payments that does not compensate for overtime, the payslip would have to reflect that fact



Record Keeping – Salespersons Hours