Luxury Car Tax Phase-Out Proposed to Maintain Resale Values
The Australian government is considering phasing out the Luxury Car Tax (LCT) gradually to protect the resale values of luxury vehicles, according to a report by The Australian. The proposal, backed by the Australian Automotive Dealer Association (AADA) and the Federal Chamber of Automotive Industries (FCAI), aims to prevent a sudden drop in resale values if the tax were to be removed abruptly.
The LCT currently affects vehicles with a dutiable value above $80,567 (or $91,387 for fuel-efficient models), which includes models from mainstream brands such as Toyota, Nissan, and Hyundai. The tax adds a 33% levy on every dollar above the threshold and was initially introduced to protect local vehicle manufacturing, which has since been discontinued.
AADA Chief Executive James Voortman expressed support for the government’s move to remove the LCT but emphasized the need to protect customers who have already purchased vehicles and their resale values. “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.”
The LCT generated $1.2 billion in revenue last year, with around $480 million (approximately 40%) coming from vehicles sourced from Europe, including models like the BMW 3 Series and Porsche 911. The Federal government is reportedly using the LCT as leverage to negotiate a better trade deal with Europe.
The phase-out of the LCT is expected to have significant implications for the automotive industry, particularly in terms of vehicle pricing and resale values. By gradually removing the tax, the government aims to minimize the impact on the market and ensure a smooth transition.
