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McMillan admits hit from fringe benefits tax, but stays silent on amount

After six weeks of silence, McMillan Shakespeare (ASX: MMS) has informed investors that the government’s recent fringe benefits tax revision proposal affected its earnings – but that’s all it’s saying.

Originally proposed by the Rudd government a month and a half ago, amendments to the current fringe benefits tax would’ve required companies and citizens filing for tax breaks on “company cars” to fill out detailed logs. McMillan shares shot down around 50% on the news as investors expected the changes to significantly impact its leasing business. Automotive sales companies like A.P. Eagers (ASX: APE) and Automotive Holdings Group (ASX: AHE) were also considered to be on the government’s chopping block, although share prices didn’t move as much.

For now, all McMillan Chief Executive Michael Kay has to say is that “Labour’s announcement on the proposed taxes and [the] air bubble created in our system is likely to have a material adverse effect on our remuneration services segment. But due to a raft of uncertainties, we really have no present view about what that is going to be.”

Foolish takeaway

With a new government in charge and relatively little chance of the proposed changes going through, McMillan shares are still down 30% from their previous $18 price. While the stock may no longer be the buying opportunity today that it was several weeks ago, this latest announcement puts the political piddles of McMillan’s nightmares one more step behind it.

Long-term rational investors saw the opportunity that scared traders carved out of McMillan’s market cap and have made a pretty penny on their risk-incorporated decision.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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