Unknown future for Luxury Car Tax

Motor vehicle companies are predicting the Luxury Car Tax (LCT) will be abolished within the next two to three years, making a number of cars on the Australian market more affordable.

The LCT was introduced almost 20 years ago to protect Australia’s vehicle manufacturing industry. It was designed to encourage new car buyers to purchase Australian made vehicles such as Ford Falcon, Holden Commodore and Toyota Camry.

The LCT is a tax on cars costing over $66,331 with a fuel consumption of more than 7.0L/100kms, or fuel efficient cars (under 7.0L/100kms) worth more than $75,526. All utes are exempt from the tax as they are classed as a commercial vehicle.

The LCT is 33% of the amount above the threshold.

The tax applies on any amount over the prices above, plus an extra 10% GST. Stamp duty will apply to all manufacturers/imports – essentially a tax, on a tax, on a tax.

With car manufacturing ceased in Australia, there is no longer a need to dissuade people from buying European cars in favour of Australian made, which has led to calls for it to be abolished.

How will it impact you?

The abolishment of the LCT will make a number cars more affordable. This will increase demand for some dealerships and overall competition.

The tax is in discussion in Government with the Free Trade Agreement and will depend on what happens in Europe and the outcome of Brexit.

Dennis Barnett, Business Services Partner

For more information on the LCT please contact our automotive group specialist, Dennis Barnett on 03 5443 0344.