Australian Conservatives call for abolition of LCT

Right-wing senator Cory Bernardi will move that the commonwealth government bury the controversial luxury car tax (LCT). And his proposal is based partly on that most unlikely of conservative causes, the environment.

In his motion, the Senator – head of his own Australian Conservatives Party – will draw on remarks by former Labor treasurer for South Australia, Tom Koutsantonis, who has previously declared his support for electric, hybrid and fuel-cell vehicles. The Senator echoes remarks attributed to Koutsantonis that "the axing of the luxury car tax... would improve access to electric, hybrid and hydrogen vehicles."

The Senator also sides with the Australian Automobile Association, which has lobbied against the LCT on the grounds that it will impose a $5 billion tax grab on the wider community over the next four years.

In the notice pertaining to his motion, the Senator cites the "burden" imposed on a number of popular cars, most of which are light commercial vehicles – Ford Ranger, Toyota HiLux, Mitsubishi Triton, Holden Colorado and Nissan Navara – but two mentioned are small passenger cars, the Ford Focus and Toyota Corolla.

According to the Senator, the burden amounts to $1000 for the two small cars and the Ford Ranger, or $1300 for the other light commercial vehicles. In an interview with 3AW last year, Senator Bernardi stated that the LCT was costing buyers of the Toyota LandCruiser as much as $3000 extra. Other than that vehicle – in 200 Series form – the other vehicles the Senator mentions are not directly subject to the LCT.

Toyota's LandCruiser Prado (pictured) is also subject to the LCT, as is the high-grade specification of Kluger.

During the radio interview, the Senator also remarked that "the government is addicted to taxpayers' money."

In that same interview he stated that the Corolla and Focus were both built in Thailand and were subject to import duty – which is unrelated to the LCT, and doesn't actually apply to products imported from Thailand, a country that entered into a free trade agreement with Australia many years ago. Not even the rip-snorting turbocharged and all-wheel drive Focus RS is subject to the LCT.

"These tariffs apply to a lot of European cars which have much lower emissions," he also observed in the interview.

"In effect, the government is preventing people from being able to afford vehicles that may make a positive contribution to the environment."

Many European prestige vehicles that are rated at "much lower emissions" are specifically imported to take advantage of the LCT dispensation for cars that consume fuel at a rate of 7.0L/100km or lower.

So the Senator is confusing the LCT with the vehicle importation duty and appears unaware of the free trade status Australia has secured with Thailand. But despite that, the Senator is on safe ground calling for the LCT to axed. The Productivity Commission is opposed to the tax, as are the car companies – even those that were building cars here until recently. It's been long conjectured that the government will have to abolish the LCT before it can enter into a free trade agreement with Europe /eu-fta-to-kill-lct-45755/.

The problem for government, however, is that something must replace the LCT, which has been a lucrative money-spinner in the past, although the tax revenue has fallen since the Rudd government raised the tax rate from 25 to 33 per cent. Tax revenue dropped away despite the increased rate because the Greens withheld support until the government agreed to a low-emissions loophole that the car companies and their customers were subsequently able to exploit.

Our tip is the LCT will be abolished in favour of a broad-based emissions levy, to be introduced after the next federal election. The last time such an idea was proposed, however, the government backed down quick smart, in the face of sustained attack from the car industry.

But as with everything related to emissions, climate change policy, conservative politicians and the automotive industry in this country there's no sign the 'fat lady' has even taken to the stage just yet.