LCT threshold raised
New thresholds for Luxury Car Tax and fuel-efficient car exemption are on the rise, but not at the same rate as inflationThe Australian Taxation Office has announced that the applicable threshold for the Luxury Car Tax in the 2010/11 financial year will be $57,466. That represents a $286 hike from the previous threshold of $57,180.
Furthermore, the ceiling on the retail price of fuel efficient vehicles exempt from the tax* has risen from $75,000 to $75,375. In both cases, the increase represents a hike of around 0.5 per cent.
Yet inflation for the year, based on the March quarter, is around 2.8 per cent. As a consequence, the more car prices increase in line with inflation, the greater the number of cars being sold subject to the Luxury Car Tax. It's a different kind of bracket creep, basically.
And at the other end, with the fuel-efficient car exemption limit rising by a similar percentage, fewer cars will be fully exempt from the tax in future.
While the government appears to be reaping as much from the taxation on luxury cars as it can, its own expert in Treasury, Ken Henry, argues against the tax altogether. Here's what the recently released Henry Review had to say about the Luxury Car Tax:
The Henry Review also cited the motor industry's views in this text:
* Upper limit on the tax-free dispensation applicable to vehicles using fuel at a rate of 7.0L/100km or less.
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