Automotive industry slams Victoria’s new LCT

THE Australian automotive industry has resoundingly slammed the Victorian state government after announcing that it will impose its own luxury car tax on new vehicles priced over $100,000, which will come in addition to the existing federal LCT.

Announced today as part of the Victorian state budget, the new LCT will be charged at a rate of seven per cent of the market value for new vehicles priced between $100,000 and $150,000, while $150,000-plus vehicles will be slugged nine per cent.

Set to be introduced on July 1, the new LCT will not apply to low-emissions vehicles and those used by farmers in the business of primary production.

When announcing the new LCT, Victorian treasurer Tim Pallas said that it would “not substantially distress the broader community”, according to an ABC news report.

“If you can buy a $200,000 Maserati, you’re not going to be particularly fazed by a slight increase in the rate of vehicle duty that you have to pay,” he said.

The auto industry’s peak body, the Federal Chamber of Automotive Industries (FCAI), did not share this sentiment.

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

Mr Weber added that the “the fact that states and territories are now considering and implementing this tax is beyond rational belief” as federal and now state LCTs could prevent a European free-trade agreement from being developed.

The Australian Automotive Dealer Association (AADA) also weighed in on the issue, with chief executive David Blackhall stating that the new LCT is “incredibly concerning for an industry which is currently doing it tough”.

“The new-car retail industry in Victoria has contracted by more than 10 per cent year-to-date – the most of any state in the country,” he said. “Now is not the time for a tax grab, with people’s businesses and jobs at stake.

“This will be framed as a tax on luxury vehicles which will fall on wealthy individuals, but it is well known that these vehicles are often purchased by businesses. This will simply constrain economic activity.

“This is, of course, a tax on a tax on a tax – triple taxation since stamp duty compounds on both GST and the federal luxury car tax. It’s a bad tax, a poor policy choice and will hurt the new-car retail industry.”

The new LCT arrives as the Victorian state government is looking to make up for its $5.2 billion drop in stamp duty revenue due to the housing market decline that is being felt Australia-wide.

A similar move was made by the Queensland state government in the 2018-2019 financial year, with it introducing an LCT of two per cent on the dutiable value of new vehicles priced over $100,000.

As reported, the federal LCT is charged at a rate of 33 per cent for every dollar over its $66,331 and $75,526 thresholds for new vehicles with claimed fuel consumption of more or less than 7.0 litres per 100 kilometres on the combined cycle test respectively.

Either way, the FCAI and its members have repeatedly called for the federal LCT to be removed, given it was introduced in the 2001-2002 financial year as a means to protect Australian car manufacturing – an industry that ceased to exist in October 2017.