Your questions answered: Why am I paying luxury car tax for my EV?

There’s a dispensation for green cars built into the luxury car tax (LCT), and ‘green cars’ naturally includes battery-electric vehicles.

Rather than pay 33 per cent of the car’s price above the current threshold of $69,152, EV owners are let off the hook if the car they’ve purchased is priced below $79,659.

This $10,000 difference – it used to be $15,000 a decade ago – saves EV owners around $2500 off the purchase price, but that’s a pittance when EVs can currently easily cost $30,000 more than a conventional version of a comparable car.

That expense is not necessarily because it’s loaded with luxury extras either. Much of the added cost is due to the large lithium-ion battery the EV needs to run 400km or more on one charge.

At the moment, prestige brands are working both sides of a very broad gulf: one foot in the camp that’s definitely ‘not luxury’ – as in the case of the Mercedes-Benz EQA 250 and Volvo XC40 Recharge Pure Electric – and the other foot in the camp populated by high-grade models that are priced well above the LCT threshold for green cars.

Some consumers might argue that the EQA 250 and the XC40 Recharge actually are luxury cars, but it boils down to one’s definition of ‘luxury’.

The existence of the LCT in its current form stands in the way of any models filling the gap in price between the EQA 250 and the larger Mercedes-Benz EQC 400 – a difference in price of over $47,000 at today’s prices.

There’s been much chatter about EV owners not paying fuel excise, or how they should not be entitled to taxpayer support, but there has been very little discussion about how much these cashed-up EV buyers are being ripped off by the system.

Question: The luxury car tax was introduced to protect the Australian car manufacturing industry. Seeing as we no longer have a car manufacturing industry, how come we still have what effectively is now an electric car tax? Is it just government greed? – Damian M

Answer: The LCT was a cash grab from the start, remembering it was only set at the price of the Holden Statesman and Ford Fairlane and not to ‘protect’ the lesser locally-made models including the Toyota Camry. It should have been removed when local manufacturing ended but was not because people who buy nice cars are a cash cow. Currently, the biggest earner for the government from LCT is Toyota via the likes of the LandCruiser and Prado, which are 4x4 off-roaders (not ‘cars’) and not necessarily luxury vehicles. And now it’s shifting focus to electric cars at a time when all governments should be encouraging, not taxing, the changeover.

Question:

Answer: The X3 is the better of the BMWs since it received a complete overhaul a couple of years ago (the X4 is the same mechanicals with a coupe-ish body that lots of people like). But the GV70 is a really impressive car, all-new this year, from a brand that is doing everything to make an impact in Australia. I’d go for the Genesis. (Ed: But I wouldn’t – I think the brand’s resale value will be problematic for some time – whereas you can rely on decent residual via the X3.)

Question: I am driving a 2016 Toyota RAV4 but was considering a new car. Is it reasonable to assume that a tipping point has been reached and it’s better to wait up to three years and get an EV, given that I’m okay with the current car for my usual city driving with a couple people or more on board, and occasional long-distance highway driving? – Navid N

Answer: Australia is nowhere close to an EV tipping point, despite all the coverage of new battery-electric cars and talk about charging infrastructure. Sales of fully-electric cars are around two per cent of the market, and even hybrids are still a relative rarity outside the major cities.

Question:

Answer: The SsangYong Rexton is the value choice but the latest D-MAX is new this year and the one to have.

Question: Hoping you can offer some suggestions in small-to-mid-sized SUVs for our new P-plate driver early next year. She is currently on her Ls and is doing her hours in a 2019 Nissan X-TRAIL ST-L. We’re looking for something similar, with good safety features, especially in wet conditions and also need sufficient boot space for instruments (saxophone/trombone). – Annie D

Answer: If you’re buying used you cannot go past the Subaru Forester, which drives like a car but has the space you need. It has a great reputation. To compare with something new, take a test drive in a Hyundai Venue for its size and city-first practicality.

Question:

Answer: Since there are 17, 18 and 20-inch alloys as standard on the MU-X then Isuzu has no real drama with what you’re suggesting. One idea would be to advertise a straight swap with an owner of a new LS-M with the 17s. Or ask the dealer if they want to do a swap between two cars, offering your ‘premium’ 20-inch wheels for someone who has ordered with the cheaper 17s.

Question:

Answer: Unless you’re a giant sun lover then the coupe is definitely the one to have. The Mustang is a lot more costly as a drop-top and the chassis is not as rigid. The four-cylinder Mustang is better balanced and the economy is way better, but most Mustang buyers are going for the full immersion of the V8 soundtrack and then thump away from the lights. Most Mustang purchases are emotional, but if you’re truly focused on value then the smaller engine is surprisingly competent.

Question:

Answer: The Seltos is an excellent choice, compact but also nicely refined and good value.

Question: My wife is wanting to update from a 2009 Mercedes-Benz B 200 turbo. She is considering 2017 models of the Mercedes C-Class, CLA, GLA or a BMW 3 Series. – Carmine S

Answer: The best of the field in 2017 was definitely the C-Class, so that would be first choice. If she is keen on the hatchback style of the B 200 then consider the convenience of the GLA, which was a nicely refined little SUV with a touch of style.

Question: We currently have two BMWs, a 2017 330i Touring (wagon) and a 2010 BMW 125i. We are thinking of upgrading the 2010 car to a BMW 440i or a Mercedes-AMG C 43. We have not test driven either. Do you consider one a better car than the other? Reading the different reviews online we get mixed messages as to what seems to be better. Alternately is there another vehicle we should consider with a six-cylinder in a sedan with a bit more luxury? – Jan B

Answer: The C 43 is a lovely car, but we get a considerable number of complaints about front tyre scrubbing and wear. On that basis alone and given how close the cars are in most areas, the BMW is the better choice.

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