European Free Trade Agreement tweaks LCT

Australia’s freshly minted Free Trade Agreement (FTA) with Europe will see prices of some European-sourced vehicles reduced by as much as five per cent now the import tariffs have been removed. The FTA was announced in tandem with an increase in the Luxury Car Tax (LCT) threshold for zero-emission vehicles from $91,387 to $120,000.

The adjustment of the LCT threshold was a key term in getting the FTA across the line for Australia and will have some fairly major impacts on the market.

For starters, electric vehicles priced above $91,387 will get cheaper – to varying degrees – with that especially true for those priced under the new $120,000 barrier.

European-sourced vehicles of any description will also get cheaper seeing as the previously inflicted five per cent import tariff has been scrapped; everything from the Skoda Fabia through to the Lamborghini Revuelto.

The biggest impacts will be had on the Euro-supplied EVs priced between the old threshold and the new one – think Audi Q6 e-tron, BMW iX3, VW ID.Buzz GTX, Mercedes-Benz EQA etc – where both the LCT and import tariffs will no longer apply.

The savings will be even bigger for those who purchase such a vehicle via a novated lease.

It’s unclear exactly when the new FTA and LCT threshold will be implemented seeing as the finer details of the agreement are still being finalised, but it’d make sense to expect both changes to be in place as of the new financial year.

The Federal Chamber of Automotive Industries (FCAI) simultaneously welcomed the tariff axing and criticised the tweaked LCT terms.

“The removal of the tariff is a positive outcome for Australian consumers and brings European vehicles in line with those imported from other major markets such as China, Japan, Korea and Thailand,” CEO Tony Weber said.

“The change to the Luxury Car Tax is incremental and leaves in place an outdated measure that no longer reflects the structure of the Australian automotive market.”