Luxury Car Tax Phase-Out Proposed to Safeguard Resale Values
The Australian government is considering winding down the Luxury Car Tax (LCT) in stages rather than abolishing it outright, according to a report by The Australian. This move is backed by the Australian Automotive Dealer Association (AADA) and the Federal Chamber of Automotive Industries (FCAI) to protect the resale values of near-new luxury vehicles.
The LCT, which currently adds a 33% tax on vehicles with a dutiable value above $80,567 (or $91,387 for fuel-efficient models), has been a contentious issue. It was introduced in the early 2000s to support local vehicle manufacturing, now discontinued. The tax affects not only luxury brands but also mainstream models from manufacturers like Toyota, Nissan, and Hyundai.
AADA Chief Executive James Voortman supported the government’s initiative 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 coming from European-sourced vehicles like the BMW 3 Series, Mercedes-Benz GLC, Porsche 911, and Audi RS6. Mainstream brands like Toyota also contribute significantly to LCT revenue through models such as the LandCruiser 300 Series and Prado.
The government is exploring alternatives to replace the lost revenue, potentially through a road user tax designed to offset the decline in fuel excise as electric vehicle adoption increases. The LCT is also being used as leverage in trade negotiations with Europe to promote locally produced products.
