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NEWS
Luxury Car Tax threshold hits $60k
And squeeze on green car dispensation window continuesThe latest changes to the Luxury Car Tax announced by the Australian Taxation Office last month highlight a continuing trend in the administration of the tax.
While the threshold at which the tax applies has been raised from $59,133 to $60,316, the cap on the green car exemption – for vehicles that use as little fuel as 7.0L/100km or less – remains $75,375.
When the Rudd government announced five years ago that it was increasing the Luxury Car Tax (LCT) from 25 per cent to 33 per cent, the threshold was $57,180. The tax percentage increase only made it through the Senate after the Greens insisted that vehicles consuming fuel at the rate of 7.0L/100km or less be exempted from the LCT – up to a ceiling of $75,000.
In the years since, the threshold has risen by over $3000, but the upper limit for the green exemption has only increased by $375. Back in 2008, the gap between the two figures was nearly $18,000. Five years on it has fallen to around $15,000.
The threshold is set in accordance with an all-groups movement within the CPI (Consumer Price Index), but the upper limit for the green car exemption is decided by a motor vehicle purchase sub-group of the CPI. As a consequence of motor vehicle pricing stagnating or rising in only small increments, the lower threshold will gradually move up, relative to the exemption ceiling. This makes the challenge of price setting for 'luxury cars' harder over time.
Prestige car brands are already finding that a substantial component of their sales volumes is composed of vehicles that don't attract the LCT in the first instance. Clearly consumers who can afford to buy a car priced around $60,000 or higher are voting to purchase something that won't cost an extra 33 per cent in government revenue. But as time passes the number of cars that will incur the LCT after specifying factory-fitted options will grow, for instance, as the added cost of the options takes those cars across the applicable threshold or – for 'sub-7.0-litre' cars – beyond the exemption ceiling.
In the lead-up to the next federal election one thing to watch will be the prestige car importers lobbying the opposition to relocate the LCT goal posts somewhere more to the industry's liking.
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Written byCarsales Staff
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