ATO raises LCT threshold
But the $1300 lift in the Luxury Car Tax starting point isn't bookended by a higher ceiling for fuel efficient vehiclesThe Australian Taxation Office has increased the threshold beyond which the Luxury Car Tax is payable from $61,884 to $63,184.
This adjustment allows buyers to specify additional options up to the new threshold, without incurring the Luxury Car Tax (LCT) as a component of the car's price. Car companies can also boost the price of their cars up to the new threshold, which takes effect from July 1, without imposing any LCT on their customers.
The new threshold is $1300 higher, but the cap for the fuel-efficient cars dispensation remains where it was – at $75,375. Absolving consumers from paying the tax on cars rated at a combined-cycle fuel consumption figure of 7.0L/100km or less, the dispensation was capped at $75,000 when it was introduced for the 2009-10 financial year. For the following year it was raised to $75,375, where it has remained ever since.
The Luxury Car Tax has never been a popular tax, but it reached new lows in 2008 when the Rudd government of the day set about raising the tax from 25 per cent applied to the retail figure exceeding the threshold to 33 per cent. To get that increase through Parliament the government was forced to do deals with independents and the Greens – that party agreeing to the increase once its fuel efficient vehicle dispensation was accepted as an amendment.
More recently, even government's own Treasury has criticised the tax for a plethora of reasons, and the LCT is perceived to be a hindrance to a free trade agreement with Europe.
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