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Residual values will crater if the Luxury Car Tax is removed in one fell swoop, according to automotive industry representatives, and should instead be phased out.
The Luxury Car Tax (LCT) will not be axed in one hit, instead it will be phased out by the Federal Albanese government in stages to protect resale values, according to a new report.
According The Australian, the controversial tariff will slowly be wound down, but over what period and to what degree is still unclear.
While called LCT, the tariff affects all vehicles with a dutiable value above $80,567 (or $91,387 for fuel-efficient models), which encompasses models from mainstream brands such as Toyota, Nissan, and Hyundai.
LCT adds 33 per cent for every dollar above the threshold, and was introduced in the early 2000s as a measure to protect local vehicle manufacturing, which has since been discontinued.
AADA Chief Executive James Voortman told The Australian that ensuring current luxury car buyers and dealers are protected is key to the tax’s removal.
“We fully support the government’s movements to remove the LCT,” Voortman said.
“However, protecting customers who have already purchased a vehicle and their resale value must be considered if this tax is removed.
“There is clearly more work needed on how the removal of the LCT would be implemented taking into account the effects on automotive businesses and their customers.”
Last year, LCT generated $1.2 billion in revenue, which the government may seek to replace with a road user tax that is also designed as a way to make up the shortfall in fuel excise with the increasing adoption of electric vehicles (EVs).
The Australian also reports that of last year’s LCT revenue numbers, around $480 million – or approximately 40 per cent – came from vehicles sourced from Europe.
However – at least in 2018 – the majority of LCT revenue is skewed towards more mainstream brands such as Toyota who fields the LandCruiser 300 Series and Prado.
The Federal government is reportedly using the LCT as leverage to negotiate a better trade deal with Europe, wherein locally produced products could gain more prominence.
Tung Nguyen has been in the automotive journalism industry for over a decade, cutting his teeth at various publications before finding himself at Drive in 2024. With experience in news, feature, review, and advice writing, as well as video presentation skills, Tung is a do-it-all content creator. Tung’s love of cars first started as a child watching Transformers on Saturday mornings, as well as countless hours on PlayStation’s Gran Turismo, meaning his dream car is a Nissan GT-R, with a Liberty Walk widebody kit, of course.
