Federal Treasurer Chris Bowen has defended the government's decision to alter the way fringe benefits tax (FBT) is calculated for cars and says people who deserve a tax concession will get one.
The continued fallout from the car industry over the $1.8 billion FBT change to help pay for an early introduction of an emissions trading scheme came as new data shows uncertainty surrounding government policies has the biggest impact on business sentiment.
The FBT change announced on Tuesday, which does away with the 20 per cent statutory rate - regardless of kilometres travelled - and requires people to log business use of a private car, is expected to impact 325,000 people.
"This is going to be like a baseball bat to the motor vehicle industry in Australia," shadow treasurer Joe Hockey said.
But Treasurer Chris Bowen said the government hadn't abolished the FBT concession on lease and salary-sacrifice arrangements.
"If you are using your motor vehicle for business use, you deserve the reduction, you'll get the reduction, you'll keep the reduction," he said.
He clarified that people will need to justify a claim of business usage, either by filling in a log book or using a mobile phone app to track their percentage of business use over three months every five years.
BDO tax partner Mark Molesworth believes parliament should be recalled to examine the topic as soon as possible given the far-reaching impact the changes will have.
Motoring clubs are also calling for talks on the FBT amendment.
"Motorists already pay their fair share to the budget bottom line and should not be targeted to help minimise the budget impact of other policy decisions," Australian Automobile Association Executive Director Andrew McKellar said in a statement.
A new survey found 70 per cent of respondents pointing to uncertainty over government policy as having the biggest impact on conditions among medium-sized businesses.
Commonwealth Bank of Australia's Future Business Index tumbled 7.8 points in the June quarter to a six-month low of 5.2 points, having risen in the past two quarters.
CBA chief economist Michael Blythe said fragile sentiment among firms with a turnover of $10 million to $100 million was due to ongoing global uncertainties, volatile financial markets, a rapidly moving currency and a degree of political uncertainty ahead of the federal election.
In contrast, a leading index of activity continues to point to above trend economic growth late in 2013 and into 2014.
The annualised growth rate of the Westpac-Melbourne Institute leading index was 4.9 per cent in May, above its long term trend of three per cent.
However, Westpac chief economist Bill Evans is not confident the pace of economic growth is likely to pick up markedly, forecasting only 2.4 per cent growth in the year to March 2014.
He expects an interest rate cut when the Reserve Bank board meets in August.
"With weak business confidence, disappointing evidence around consumer spending, a steadily rising unemployment rate and slowing wages growth, the case for another cut seems respectable," Mr Evans said.
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