The car industry is urging the federal government to reconsider its decision to remove the fringe benefit tax (FBT) concession on vehicles to help pay for the ditching of the carbon tax.
Prime Minister Kevin Rudd announced on Tuesday Australia will move to a market-based emissions trading scheme (ETS) from July 1, 2014 - one year earlier than planned.
This means the fixed carbon price of $25.40 per tonne from July next year won't apply, and the price should drop to about to $6 initially under an ETS.
The carbon price is currently $24.15.
The move to an ETS will cost the budget $3.8 billion over the next four years, of which $1.8 billion will be made up from FBT changes relating to salary-sacrifice and employer-provided motor vehicles.
The Federal Chamber of Automotive Industries (FCAI) said the changes that start from Tuesday will have dire consequences, affecting both imported and domestically manufactured car sales.
"The effects will flow right through the industry, including to dealerships and service centres," FCAI chief executive Tony Weber said in a statement.
"I want to know if the government truly understand the consequences of this decision, and why the industry was not consulted on such a significant change."
Accounting firm Grant Thornton Australia said it would make administration costs more cumbersome because of the way the benefits would need to be calculated.
The current statutory formula will be abolished for new contracts, leaving the log book method that requires an employer to track the costs relating to each car, and to estimate the business use using employee-completed log books.
FBT is then payable on the private portion of the costs.
"This is a major additional administrative burden compared to the previous statutory formula method," Grant Thornton FBT specialist Elizabeth Lucas said.
"It will also mean a higher FBT impost for many employers."
The retail sector is worried about the consequences of FBT change, saying it will impact 320,000 employees across the nation.
"They will lose money and they will have less money to spend," Australian Retailers Association executive director Russell Zimmerman told AAP.
More broadly, Australian Chamber of Commerce and Industry chief economist Greg Evans described the move to an ETS as a "short-term fix" without out addressing the long-term issue.
"It provides no real solution, it provides no certainty and it doesn't deliver a sustainable reduction in costs for business," Mr Evans told reporters in Canberra.
He said it was still a multi-billion dollar tax impost on Australian business that its competitors don't pay.
"It's harmful for business, its harmful for the economy and its harmful for jobs," he said.
The Australian Industry Group was also critical of the saving measures.
"The change to the FBT treatment of cars will mean that taxpayers will face additional tax bills every year," chief executive Innes Willox said in a statement.
The Business Council of Australia (BCA), representing the nation's top 100 bosses, says businesses will still suffer.
"Businesses are still likely to be paying one of the highest carbon prices in the world for up to another year," BCA chief executive Jennifer Westacott said in a statement.
The BCA believes the ETS design is flawed because it does not deal with industry competitiveness issues or ensure Australia's action remains in line with the rest of the world.
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