Will luxury car tax be abolished in australia?

Luxury car tax (LCT) thresholds have been raised again, but the main body of the automotive industry in Australia has called for the abolition of the tax. The luxury car tax threshold will increase by 6.6% for fuel-efficient vehicles and 3.9% for other vehicles. The luxury car tax 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). And while there has been hope that the Australian government will reduce the luxury car tax on electric vehicles to encourage consumers to buy them, this has not yet happened.

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 price the Australian government may have to pay is the gradual decrease of 33 percent in the luxury car tax and 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 (LCT) from this year to some point in the medium-term future. Introduced by the Federal Government on July 1, 2001, the LCT was implemented as a means to deter and limit Australians from buying prestigious and exotic imported cars, encouraging them instead to buy Australian-made cars from Holden, Ford and Toyota (where such cars existed).

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. Twenty years after its introduction, the first signs begin to appear that the Luxury Car Tax (LCT) is reaching the end of the road.

Shari Venturelli
Shari Venturelli

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