McMillan sees brighter tax days ahead
Australia's biggest salary packaging company McMillan Shakespeare says it won't know until 2014 the effect of the former government's attempt to tighten the rules on tax benefits for salary-sacrificed cars.
But the one-time market darling has suggested that regulatory risk will not be a problem in the near term, after securing support for its plight from the Coalition, and says that demand for novated leases is inching back to levels seen a year ago.
McMillan Shakespeare provides salary packaging and vehicle leasing administration services, and its clients include every government in Australia. It has about half of Australia's outsourced remuneration services market.
Its shares have made up about half the ground lost in July when Labor announced plans to end the favoured tax treatment of company cars, a tax break estimated by Treasury to cost $800 million a year.
McMillan Shakespeare said at its annual meeting in Melbourne that the announcement led to "sleepless nights" and took every part of the industry "completely by surprise".
In 2010, it said the purchase of an asset management business was a "desirable diversification from fringe benefits tax risk".
Declining to give full-year guidance on Tuesday, McMillan Shakespeare said Labor's proposal had whacked its business during the September quarter, and the company wouldn't return to "business as usual" until the 2014 calendar year.
It also announced an 18¢ dividend, and the purchase of CLM Fleet Management in the UK for £8.5 million ($14.2 million).
Questioned whether McMillan Shakespeare was tweaking its business model to derisk against regulatory change, chairman Ronald Pitcher said: "We're diversifying, but within the ... finance industry. That's part of our long-term plan.
"But remember, we've got a very good business. We are not going to walk away from the core business ... it's very good to us. So why would we? We think what we went through in that period, and the undertakings that come out of that, that we have a good future to look forward to."
Chief executive Michael Kay said the CLM purchase was driven in part by a desire to diversify, and there had been a silver lining to the political fight. "This perceived regulatory risk is a fantastic barrier to entry in our market. So it's not a bad market to be in, because a lot of people go in and go, 'I can't get my head around this'.
"And the other if you like contrarian point there is because this has been such a hullabaloo, this [change to FBT] is probably off the agenda for some considerable time, if it ever gets on the agenda again."
Mr Pitcher said there had been no criticism of the company's decision in August to suspend "all communications with investment analysts, shareholders, the press etc until after the election".
The Australian Shareholders Association said the silence "sat uncomfortably with the modern practice of continuous disclosure".