Call to cut Luxury Car Tax on Australian-made vehicles

The Federal Chamber of Automotive Industries has called for an urgent review of the luxury car tax, which is about to enter its fourth fiscal year at the increased rate of 33 per cent.

"It's just a bad tax and the threshold should be substantially lifted or the tax should be substantially reformed or abolished," the chief executive of the FCAI Andrew McKellar told the Carsales Network.

In July 2008 the newly elected Rudd Government increased the Luxury Car Tax from 25 per cent to 33 per cent on all vehicles above $57,009 (the threshold is now $57,466 inclusive of GST).

A few months later the Federal Government also gave fuel-efficient luxury cars a concession by making them LCT-exempt up to the value of $75,375, provided the combined-cycle fuel consumption was 7.0L/100km or less.

The overhaul delivered a huge benefit to imported vehicles, and dealt a blow to top-end locally-made vehicles, which were already struggling against the affordability of imports thanks to the strong Australian dollar.

All cars in the Holden Special Vehicles and Ford Performance Vehicles ranges – and Holden's top end Calais, SS and Caprice – are affected by the 33 per cent LCT.

FPV boss Rod Barrett says abolishing the LCT on locally made cars would slash about $3500 off the price of a $70,000 Falcon GT.

"Anything that's going to make a ticket price on a car more attractive to a purchaser would … benefit local industry," he said. "If there was a review I would support it; if [an LCT exemption] came in, of course we'd embrace it. It affects every one of [FPV's] cars … they're all above the threshold."

Holden Special Vehicles declined to comment but Holden spokeswoman Emily Perry conceded there would be "some benefit" if LCT was removed from Australian-made cars.

But Holden is not being as vocal on the LCT issue, likely because it has just received $39 million of Federal government funding to go towards the development of the next Commodore.

FPV's Rod Barrett said: "I can't comment on what governments do today, yesterday or tomorrow however I would have thought … [when LCT was introduced] it was more aimed at the import luxury market, your BMWs and Mercedes and so on, rather than Holdens and Fords."

The FPV boss said LCT is "worth reviewing now … we're going into our fourth year next year of it and we need to look at [how it's affecting] local industry".

But the FCAI believes the roll back of LCT should apply to all luxury vehicles, not only locally-made cars - a point made as recently as yesterday by David McCarthy, spokesman for Mercedes-Benz.

McKellar said if the Federal Government were to make locally-built cars exempt from LCT, it could be "exposing itself under some sort of action under the [World Trade Organisation] rules".

"[LCT] does hit some of the premium locally produced models, which affects local manufacturers, just as it affects some of the other premium brands. Our position [is] that it should be either abolished or substantially restructured and applied to all vehicles.

"We certainly would not be in a position to support a discriminatory approach to phasing it out. The incidence of the tax is growing in terms of the numbers of models it captures over time, [and it] certainly needs to be addressed.

"We'd argue the [tax] rate is too high, the threshold at which it cuts in is too low and both need reforming. And we would argue it needs to be done across the board."

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