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Luxury car tax changes…

Luxury car tax changes arrived on July 1 with the threshold now higher than before, but not all luxury car makers have passed on the saving.

RECENT CHANGES ANNOUNCED to the luxury car tax (LCT) raised the threshold at which it applies from July 1 to $61,884 in line with CPI – up $1568.00. The threshold for vehicles with a combined fuel consumption less than 7.0 L/100km is now $75,375.

LCT is a tax of 33 per cent on luxury cars sold or imported where the value of a car exceeds the luxury car threshold and only applies to the amount above it. As a result of the change to the threshold, some vehicles have fallen below it and are no longer subject to LCT. Toyota reduced the prices of 19 models, 17 of them by the full $470.

Brands such as BMW, Infiniti, Jaguar, Land Rover, Lexus, Mazda, Porsche, Range Rover, and Volvo all confirmed they have passed on the tax reduction in full to customers through a reduction in the list prices of affected vehicles.

On the other hand, Audi, Chrysler, Jeep, Lamborghini, Lotus, Maserati, Mitsubishi, McLaren, Nissan and Volkswagen have elected not to pass on the saving to customers directly through price cuts at this stage.

Despite being a “luxury car” tax, vehicles such as the Toyota Land Cruiser and Prado, by no means “luxury cars”, are caught in the tax net, paying the highest tax to the government.

Mercedes-Benz has been the most vocal opponent of the tax in recent years, but Toyota has recently added its voice to the protest.

Mercedes-Benz senior manager of corporate communications David McCarthy says “We all know the tax doesn’t make sense. No sense at all. It’s irrational, it’s been condemned by the European Union, and even the Henry Tax Review said it should be abolished. The reality is, politically it’s very difficult to remove. We proposed a couple of years ago to replace it with an emissions tax. But the race has definitely been run. The time for manufacturers to get together on this was long ago.”

Toyota has come late to the party, urging federal politicians to abolish the luxury-car tax, describing the impost as ‘discriminatory and inefficient’. Executive director of sales and marketing Tony Cramb said the luxury car tax should be abolished, especially since there is no equivalent tax on other luxury items such as antiques, yachts, motor boats and jewellery.

“Australian motorists are already heavily taxed with GST, stamp duty and registration fees when buying a new car, as well as road tolls and a hefty tax on fuel,” Mr Cramb said.

“New-vehicle buyers should not be singled out to pay the additional burden of a so-called luxury tax – especially one that is so inefficient and poorly designed. The punitive tax rate was originally 25 per cent on the value of the vehicle above the threshold, but was increased to 33 per cent in 2008. Application of the tax does not recognise that many vehicles in this category offer important safety, environmental and theft-reduction benefits. The tax also results in significant compliance costs that are borne by our dealers.”

Audi Australia senior product communications executive Shaun Cleary says a final decision had not been made yet, but suggested the brand was likely to increase the value of affected models by adding features to MY15 vehicles, which should start arriving here in the final quarter of this year.

Lotus and Maserati Australia general manager Glen Sealy advised there were no changes to the prices of its vehicles at this stage but confirmed the situation would be assessed as part of the brand’s product programs for the second half of the year.

Paul Murrell

Paul Murrell

Paul’s mother knew he was a car nut when, aged three, he could identify oncoming cars from their engine note alone. By 10, he had decided what his first car would be and begun negotiations with a bank to arrange finance, the first of many expensive automotive mistakes. These days, he is happy to drive other people’s cars (on the road, off the road or on the track) and write up what’s good about them and what isn’t.