The Australian automotive industry has long been calling for the abolition of the Luxury Car Tax (LCT). The LCT threshold has recently been raised, but this has done little to appease the industry. The threshold is indexed on July 1 of each year and is based on any increase in the motor vehicle purchase subgroup of the Consumer Price Index (CPI). Indonesia, which generally adds a 10 to 30 percent tax on luxury cars, will eliminate that tax from March to May of this year on sedans and two-wheel-drive cars with engine power below 1,500 cc, to help its struggling automotive industry.
The Australian government may have to pay the price of gradually decreasing the LCT by 33 percent and offering some concessions to the alcohol tax. The current coronavirus pandemic and Australia's battered economy have driven plans to begin dismantling the controversial luxury car tax from this year. The electric vehicle industry has also argued that grouping “fuel-efficient” electric vehicles and cars in the same category is problematic, given that, for the purposes of the LCT, “fuel efficiency includes cars that claim to consume up to seven liters of gasoline per 100 km. Federal Automotive Industries (FCAI), the industry's most important body, has once again called for the abolition of the luxury car tax and replaced by a charge for road users.
It has been twenty years since its introduction, and now there are signs that the Luxury Car Tax may be reaching its end. The main body of the automotive industry in Australia is still pushing for its abolition, and with the current economic climate, it may be possible in the near future.
