SA Treasurer calls for Luxury Car Tax to be scrapped

The imminent closure of Australia’s car manufacturing industry should mean the end of tariffs, such as the Luxury Car Tax (LCT) on all imported cars, according to South Australia’s treasurer Tom Koutsantonis.

Koutsantonis says dumping the tariffs that were designed to protect the local car industry, like the LCT, will allow organisations to get low carbon-emitting electric, hybrid and hydrogen vehicles.

He will argue at a meeting of treasurers in Canberra on Friday, December 9, that the LCT will become “hard to justify” after both Holden and Ford have ceased production.

However, the government has previously signalled it will keep the LCT firmly in place.

Keeping the tax would see a quarter of a billion dollar bonus come in to government coffers over the next four years.

Budget papers tabled by treasurer Scott Morrison earlier this year showed the government expects to earn almost $3 billion from the LCT up until the 2019-20 financial year.

However since the 2015-16 Mid-Year Economic and Fiscal Forecast, LCT receipts have been revised up by $240 million over the four years to 2018-19 – a result of Australia’s growing appetite for new cars.

“LCT receipts are forecast to grow by 11.5% in 2015-16 in line with stronger-than-expected sales of vehicles subject to LCT,” the budget papers say.

Some key industry organisations are also concerned around how it would be collected if personal vehicle imports are given the greenlight.

The Australian Automotive Dealers Association warned a number of inherent flaws in the LCT’s policy structure have created complicated and unfair operating conditions for new car dealers in Australia.

“For example, the tax’s discriminatory nature has been a particular pain point for the industry. The LCT does not apply to other luxury goods such as yachts, jewellery, watches, private aircraft and artwork.”

Govt to decide fate of LCT in 2017

A ministerial working group will report back in March 2017 on whether the LCT should be axed in favour of promoting more electric and hybrid vehicles.

The group is considering whether to axe the LCT for people who purchase an EV or hybrid vehicle as a way to cut emissions and promote the uptake of EVs in Australia.

“The LCT was brought in to protect Australian manufacturing. Well the timing is right to now look at the next technology that’s coming through, which has an influence on growth of multiple industries – which is what electric cars do,” Tesla Australia spokesman Heath Walker says.

“In terms of what the LCT stands for, it’s no longer supporting manufacturing because it’s ending. I know multiple automotive manufacturers are supporting demolishing that holistically. Whether that’s just for EVs as a trial period or not, that’s our main aim – to get it removed.”