Automotive Accountants' Network Forum, 20 April 2010

Automotive Accountants’
Network Forum
Meeting 1
Tuesday 20 April 2010

Founding member of

This presentation has been prepared by Colledge’s for the general
information of its clients and forum 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)

For more information, contact Angelo Sirianni on 03 9851 6500 or email angelosirianni@colledges.com.au Founding member of
www.colledges.com.au

Why are we here?

• Maximise outcomes for Dealership Accountants
• Professional & Personal Development
• Networking
• Keep up-to-date


House Rules
• Ask questions
• Respect for presenters and colleagues
• One discussion at time
• Phones to “silent”
• Have fun!


Agenda
1. National Consumer Credit Protection Act
– Dealership exemption?

2. Improved Dealer Performance

3. FBT update

4. Division 7A

5. Son of Holdback – Latest news


Whiteboard Items
a. Dealings Book (Police Book) Angelo
b. Stamp Duty – post disclosure feedback Angelo
c. Luxury Car Tax – Accessories
sold Angelo
– Quoting ABN
d. Debtor Control – Any new ideas? Lorraine
e. I.T. – How being handled? Lorraine

Additional items?


Quote for the day

In a time of drastic change, it is the learners who
inherit the future.

Eric Hoffer
American Social Write & Philosopher
(25/7/1902 – 21/5/1983)


National Consumer
Credit Protection Act
Car Dealership Exemption?


National Consumer Credit Protection Act

Where Dealerships (point-of-sale) currently stand
• Phase 1 of the Act is complete, having passed Australian
Parliament and received Royal Assent.
• Within Phase 1, Car Dealerships are exempt (as point-of-sale)
from having to:
 Register with ASIC; and
 Apply for a credit licence; or
 Become a representative of a credit licensee.



• “Phase 2” is now underway.
• Government will review various aspects of the regulations.
• On The Treasury’s agenda is consideration of the point-of-
sale exemption.
• Colledge’s was informed by the Consumer Credit Unit in
Canberra that the Motor Traders’ Association is on The
Treasury’s review board.
 Submission due June 2010.



• Continues to be opposition to dealerships being exempt.
• In ASIC’s recent National Credit Roadshow, dealership
exemption was discussed within point-of-sale.
 Point-of-sale has such a “broad range of degrees of
involvement of people”.
 Government needs time to look at the various point-
of-sale activities and how they should be regulated.



Where Dealerships (point-of-sale) stand

But as at today, Dealerships, within point-of-sale, are
exempt from the Credit Act. This is ongoing until the
Government changes the Act.

Source: Consumer Credit Unit, The Treasury, Canberra


National Consumer
Let’s be prepared:
ASIC Requirements



ASIC Registration & Application requirements
Registration between 1 April to 30 June 2010

Applications for Australian Credit Licence (ACL) between
1 July to 31 December 2010

(Refer handout from Conference, 22/2/10)


National Consumer
Registration


ASIC Registration
• Those wanting to be involved in Credit Activities after
1 July 2010 need to be registered by 30 June 2010.
• Registration is free.
• Being registered, allows you to continue in Credit Activities.
• If you are not registered by ASIC by 30 June 2010, you must
cease Credit Activities until registered.

These points exclude those that are exempt in the Act.


ASIC Registration

Requirements
• Adhere to conduct requirements, such as being honest, fair
and responsible lenders.
• Staff training and competency as an organisation.
• Become members of External Dispute Resolution (EDR) body.
 Alternative to the courts (less formal)


ASIC Registration
Responsible lending
1. Make “reasonable enquiries” about the customer’s
objectives and requirements;
2. Take “reasonable steps” to ascertain the customer’s
financial situation;
3. Assess the customer’s ability to repay the loan without
“substantial hardship”; and
4. Do not offer or suggest products that are “unsuitable”.

Source: ASIC National Credit Roadshow (webinar)


ASIC Registration
Disclosure requirements
Lenders will have to tell customers:
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
c) How much money will be left over after these payments
have been made.

That is, all customer fees and charges,
and your commission for securing the loan.

ASIC Registration
Registration application requirements
• Being a member of an ASIC approved EDR body.
• Up-to-date company details, e.g. Company Register
• Making statements regarding conduct of directors, company
secretaries, partners, trustees
 ASIC suggests background checks on people, including if:
- been insolvent or bankrupt
- had serious fraud convictions in past 10 years
- been disqualified from managing a corporation
- had credit registration or financial service licence cancelled

ASIC Registration
• Not every person requires a licence
• A licensee can act through its employees, directors and related
corporations
• One or more third parties can be authorised by a credit provider
to act on its behalf = “Credit Representatives”.
 The Credit Reps do not need to be individually registered
 Licensee must authorise in writing their Credit Rep/s and
what credit activities they will be involved in
 Credit Reps must join an External Dispute Resolution body


National Consumer
Application for Licence


ASIC Licence Application

• Applications for Australian Credit Licence (ACL) start 1 July 2010
• Those who have not applied for ACL by 31 December 2010 must
cease credit activities until they have a licence.
• By 30 June 2011, all applications will be processed.
• ACL numbers will be required on all marketing information,
i.e. letterhead, website, etc.



• Licence fees will depend on level of credit activity
 Range from $1,000 – $21,000
 Non-refundable, including if application rejection
• ASIC will ask questions to assess suitability regarding becoming a
licensee.
• Comply with the conduct obligations in the Act.


• Provide details on the directors, secretaries, partners, trustees or
senior managers
 Need statements from each person that they are “fit and
proper” to conduct credit activities under the licence.
• From this group, nominate people as “Responsible Manager/s”
who have the expertise to be authorised under the licence.
• “Responsible Managers” have to provide their educational
qualifications and experience to support the application.


To comply with the conduct obligations in the Act, licensees will have:
• and maintain compliance arrangements and systems;
• trained and competent Reps, who are supervised;
• adequate HR, I.T., and financial resources;
• Risk Management systems in place;
• appropriate internal and external dispute resolution systems;
• Policy & Procedures to receive & assess variations in credit contracts;
• arrangements for compensation to customers
(should you breach obligations under the Act).



Due to the level of details within the Act, please note that this
presentation is a summary of the requirements for ASIC Registration and
Application for a Licence.

We encourage you to download and familiarise yourself with the
documentation on ASIC’s website http://www.asic.gov.au/credit.

A great resource within the ASIC website is their Credit Roadshow webinar.
We again encourage you to take 60 mins to watch the presentation which
was a valuable source for this presentation.


Improved Dealer
Performance


Improved Dealer Performance
Economic Recovery
• Vehicle Market 
 AutoTeam 975,000 units
 March 1M+ units
• Cash rates forecast for 2010 has  a further 0.5 – 0.75
• Employment improving
• Business sentiment best in 3 years
• Housing market booming
• Oil above $80bbl
• $A strengthening and nearing parity again
• Cautious optimism


What is driving the Recovery?
1. US economy
2. China at 9%+ growth
3. Economic stimulus around the world



What are the risks?
1. Economic stimulus funded through public debt worldwide
2. Private debts – highest in history
3. European economic performance
4. China’s growth



Key benchmarks

Jan 2010 Apr 2009
NPBT % Revenue 2.5% 2.2%
Gross % Revenue 15.5% 15%
Gross per Employee 11,000 10,000
Parts Service Absorption 57.5% 53%



Key benchmarks

Jan 2010 Apr 2009
New Vehicle Gross $2,800 $2,700
New Vehicle Penetration Rate
32% 36%
(Finance Insurance
Used Retail Gross $2,600 $2,400



Key benchmarks

Jan 2010 Apr 2009
Labour Sales per Chargeable Employee $17,000 $13,500
Parts Sales per Employee $75,000 $70,000
Expense as % Gross 70% 70%


Impact on Dealers – “Creep”
Improved trading conditions have lead to some old habits returning.
Watch out for:
1. Increased stock holding – days carry
2. Debtors creep
3. Floor plan creep
4. Head count creep
5. Expenses creep



Lessons learnt during GFC should continue to be applied at
dealership
1. Lean stock – being more selective
2. Keeping a tight control of cash
3. Balance Sheet account reconciliations
4. Managing floor plan expense – stock control
5. Staff productivity improvements
6. Control of spending


Case Study
Recent Internet & Website expense analysis performed by Colledge’s.

Dealership A
Actual cost for used car sale from internet lead
$330/sale
• Inclusive of number of leads vs sales & subscriptions fees
Costs for website maintenance $990
• Inclusive of hosting, content updates/changes (month)
Average website/internet spend for month $10,310
Average website/internet spend for year $123,720



1. Understand the impact of online advertising on dealership
expenses and productivity.

2. Do you and your Dealer Principal look at internet and
website invoices?

3. Do you have a process for dealing with internet sale leads?


Internet & Websites
Being used effectively?


Internet and Websites

• No longer good enough to have a static website
• Your website needs to be interactive and regularly updated
 Dealership news
 Automotive news
 Car/model news
 Newsletter / BLOG
• Content is king


Increase exposure, search engine optimisation and customer
leads to your website with free internet sites.

Social Media Online Directory Listings
• Twitter • Yellow Pages
• Facebook • White Pages
• LinkedIn • True Local
• Blogger.com • Hotfrog
• Slideshare • Bigroo


Analysing your website
Google Analytics is free and will provide you with:
 How many people visit your website
 New vs returning visitors
 The pages people are viewing
 How long people are staying on your website
 Where people are finding your details
(Search engines, other websites, direct link)
 Bounce rate – people clicking out immediately


Internet & Websites

What is your Return on Investment?
• Beware of over-priced website contractors and set contracts
(refer to Case Study in previous topic)
• What is your dealership’s internet spend?
• Who’s using Google Adwords?
 What is ROI?


Internet & Websites
Cost saving measures
• Ensure website contract provides a Content Management
System (CMS) to add content yourself.
• Ensure you are not paying external contractors for email
enquiries on your website.
 Having a CMS will allow you to do this yourself.
• Decrease reliance on external search sites for used car sales.
• Analyse your website regularly.

Contact Colledge’s if you need assistance or advice.


Fringe Benefits Tax


Fringe Benefits Tax

FBT year 31 March 2010

Return due 28 May 2010


Fringe Benefits Tax

Latest Update
• Major Change:
 Salary Sacrifice Superannuation contributions now a
reportable fringe benefit.
• No other changes


Fringe Benefits Tax

FBT & Motor Vehicle Dealers
• Motors Vehicles
 Pooled
 Non Pooled
• Factory benefits


Fringe Benefits Tax

• Meal entertainment
• Corporate boxes
• Recreational expenditure


Fringe Benefits Tax
Reportable Employee Superannuation Contributions (RESCs)
Have employer contributions been made for the No
employee during the year?

Yes
Do the contributions exceed the amount the No
employer is required to contribute under law
(e.g. SG Law) or some other obligation?

Yes

Did the employee have any influence over the No
amount of superannuation contributed for them?

Yes

The employee has RESCs for the year The employee does not
have RESCs for the year

Fringe Benefits Tax

Salary Sacrifice
• FBT exempt otherwise deductible

Declaration required to support FBT
• 50/50 split declaration
• Expense declaration
• RESC advice to employees


Fringe Benefits Tax
Rates & Thresholds
• Gross up rates
 Type 1 (taxable supplies) 2.0647
 Type 2 (not “Type 1”) 1.8692
• Tax rate 46.5%
• Exemptions / Reductions
 Minor Benefits $ 300 (less than)
 Long Service Awards $10,000
 Safety Awards $ 200
 In-house benefits reduction $ 1,000
 FBT reporting threshold $ 2,000
 FBT benchmark interest rate 5.85%


ATO
Division 7


1. Use of Company Assets

2. Taxing Point for Companies


Son of Holdback
Update


Son of Holdback – Update

Current status
• Majority of eligible dealers have submitted “Stop the
Clock” letters
• ATO has recognised “Stop the Clock” letters
• ATO has requested for magnitude of claim.
 Have not requested any substantiation
(amended BAS returns)
• ATO will hold claims in abeyance pending a court case to
decide the validity of the claims


Son of Holdback – Update

Current status
• ATO has begun issuing assessment notices resulting
from the amended BAS returns
• ATO is rejecting claims
 Tax payers have 60 days to object
(A procedural issue)
• A Working Group has been established to effectively deal
with the rejections


Next Meeting:
Tuesday 22 June 2010
(at The Manningham)

Agenda to include: Service Dept KPIs


Automotive Accountants' Network Forum, 20 April 2010

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