Since 1979, successive Australian governments have imposed some form oftax on luxury vehicles, but it wasn’t until 2000 when the Liberal government introduced the Luxury Car Tax (LCT). In line with the establishment of the Goods and Services Tax (GST), it was introduced to encourage buyers to purchase locally-manufactured vehicles over imported prestige vehicles. Since then, the tax has become stricter, with the threshold of the LCT having risen to above $65,000 at a tax rate of 33%.
But now that car manufacturers no longer operate on Australian shores, is there still a need for the LCT? We don’t think so.
According to Mercedes-Benz Australia/Pacific public relations, product and corporate communications senior manager, David McCarthy, “by 2019/2020 there won’t be an LCT. It will be a casualty in an (European Union) EU free trade agreement. Anyone who tells you otherwise is believing in alternative facts – that’s the reality.”
With so many stakeholders involved, we look at some areas that may be impacted if it was to be abolished in the next few years.
Having produced hundreds of millions of dollars annually for the Federal government, you can understand why they would be hesitant to abolish the tax immediately. Governments rarely like handing back revenue streams.
This would open up a whole new vehicle choice for potential buyers, who could be looking at purchasing an entirely different range of cars. From typically targeting car manufacturers such as Toyota, Ford and Holden, people could instead afford luxury brands such as BMW, Mercedes and Audi. It could potentially result in an increase in the demand for luxury cars and take away from the less-expensive models on the market.
- Importers/European Manufacturers:
As you can imagine, there would be pros and cons for importers and manufacturers should the government abolish this tax. Not only would it be more affordable for them to bring cars to Australia, but they would then pass on those savings to potential buyers.
The problem lies for large car yards who hold prestige cars worth millions. Their entire range will be devalued. The same goes for any existing owners who are looking to re-sell, as this change would drive more buyers to purchase brand new luxury cars if they become more affordable.
Having produced hundreds of millions of dollars annually for the Federal government, you can understand why they would be hesitant to abolish the tax immediately.
One suggestion made by Mr McCarthy was for the government to phase it out, rather than to scrap it immediately.
“It’s currently 33 per cent. My personal view is that you want to implement it over a three-year period – so 33%, 22%, 11%, zero,” Mr McCarthy said.
“The interest is for it to be a smooth, gradual transition. No free trade agreement implements all its parts from day one, it’s staggered, so the economy can adjust and supplies can adjust.”
- How can Simply Finance help?
Well, we know what the LCT calculations would be for any car valued at over $65,000, so we know where the value lies and how to save you as much as possible on the price of your new car.
You can contact our friendly acquisition staff anytime to find out more information.
Related Tag: Luxury Car Finance