Industry lashes out at Victorian tax grab

Update, May 27, 2019: The Victorian government has released its budget for the 2019/20 financial year, announcing that vehicles above $100,000 will be subject to stamp duty of $14 per $200 of market value, and cars priced above $150,000 will be slugged stamp duty at the rate of $18 per $200 of market value. This officially adds two new tiers of stamp duty for new-car buyers.

New vehicles priced below the federal government's luxury car tax threshold already incur stamp duty of $8.40 per $200 increment of the purchase price. The stamp duty payable rises to $10.40 per $200 for cars priced above the luxury car tax (LCT) threshold.

Currently, the LCT threshold is set at $66,331, but is set to rise to $67,525 for FY 2019/20. Vehicles priced above the FY 2018/19 LCT threshold and sold in Victoria incur stamp duty calculated at the rate of $10.40 per $200. Cars that would side-step the LCT due to the green dispensation for vehicles consuming fuel at a rate below 7.0L/100km are exempt from stamp duty.

The Federal Chamber of Automotive Industries (FCAI) has issued a statement today denouncing the Victorian government's plans to raise the stamp duty payable on cars costing over $100,000.

“It is money grabbing at its worst,” said Tony Weber, chief executive of the FCAI.

“But what’s more disturbing is that it is a tax on safety and technology. It targets vehicles that introduce innovative safety and technical features to the market.

“And the vehicle which attracts the most LCT is a Toyota Landcruiser – a popular vehicle for families and landholders. Hardly a luxury vehicle.”

The Victorian government will hand down its budget today, and while treasurer Tim Pallas is confident the Andrews government can maintain a budget surplus for the next four years, Treasury is understood to be grappling with a strong decline in stamp duty revenue following the recent downturn in the property market. That has left the state government short of revenue to the tune of $5.2 billion.

Queensland has already introduced a similar revenue-raising scheme, so the same measure in Victoria will not be without precedent, which is probably what has stung the FCAI to issue its statement. With two states raising money by this means, how long before the other states follow?

The FCAI has long been concerned that the Luxury Car Tax (LCT) is a barrier to a free trade agreement (FTA) with the European Union, and different tiers of stamp duty levied by the states – primarily applying to prestige cars, and particularly those from Europe – could confuse the issue further in the negotiations for the FTA.

“The fact that States and Territories are now considering and implementing this tax is beyond rational belief,” Weber said.