What you need to know about the $1.5 billion new car subsidy scheme

The $1 billion new Car Dealers and Automotive Recalls program was announced last week by the Federal Government to encourage the sale of more than 1 million new vehicles, but critics say the program will only benefit the wealthy.

“This program is a huge giveaway to the wealthy,” Labor’s James Shaw said.

“We need a car tax to help middle-class Australians pay their bills.”

The program is due to begin in March, but some of the car dealers and auto manufacturers who receive the grants have already decided not to take the cash, arguing the money is better spent on other things.

A spokeswoman for the car industry association, the Australian Automobile Association, said the $2.7 billion car subsidy would be available for a limited number of companies and would not be available to more than 200 dealers.

Ms Shaw said the car manufacturers had a “strong track record of delivering on their commitments”.

“There’s a lot of people that are going to have to pay their fair share of tax and their fair shares of gas tax, and they’re going to get some of that back in the form of grants,” she said.

But the program has also been criticised for providing an incentive for some manufacturers to make cheaper cars and for the Government not providing enough information about the new subsidies to enable consumers to assess their financial benefits.

Consumer groups have also raised concerns about the program, with the Australian Competition and Consumer Commission calling for a “robust review of the program’s value and effectiveness”.

But Consumer Affairs Minister Michael McCormack said the program would help people who need to buy a new car and said the government was continuing to engage with car manufacturers to “build an industry that delivers the best value for money”.

Consumer Affairs Minister Mike McCormack says the $3.7bn Car Dealership and Automobile Recalls Scheme is worth $3bn in public funding.

Photo: Brendan Esposito “The money that is being provided to the car and automotive industry is a significant portion of the funding for our programs, and that’s why the Government is investing in that sector,” he said.

“We have a robust program in place to support the industry in making the best car and the best vehicle, and the Government will continue to do so.”

The Government has also announced $1 million in grants for low-income families to buy the next generation of vehicles, including the Nissan Leaf and Toyota Corolla.

The $2 billion Car Dealer and Automotorrecalls program will cost the Australian Government $3 billion in the coming financial year.

Labor is also proposing to introduce a new “universal” car subsidy, which would also help low- and middle-income earners, with $1 in car subsidies per person, with other grants and incentives for high-income households.

Critics have said that the government is prioritising the wealthy and will only subsidise low- to middle-earners, as the money will not go to those who already have a car.

Opposition Leader Bill Shorten says he is happy to fund the car subsidy program, but has concerns about what he calls the “chase for the wealthy”.

Senator Shorten said he is confident the program can be funded and would be a great boost to Australia’s low-wage economy.

“[Car Dealers] are the only people who get the money and the only ones that get the car subsidies, and so we’ve got to do the right thing,” he told Sky News.

“We’ve got a great, wonderful car industry in Australia.

But it’s also a great business to run and to be a part of, and we need to do it.”

Labor will also introduce a bill to extend the current car subsidies until the end of 2020.

It has previously pledged to provide a $500 tax credit to people who buy a car with the first $150,000 of vehicle costs, but will not extend the car rebate to the first three years of the current program.

ABC News has contacted Nissan Australia for a response.