More buyers could be slugged thousands of dollars when purchasing their next new vehicle after the Federal Government announced changes to the Luxury Car Tax threshold to be introduced in 2025.

The tax, which was introduced in 1990, is imposed on all luxury vehicles purchased over a certain threshold, which is currently $89,332 for fuel-efficient vehicles, or $76,950 for other vehicles.

However, changes to the definition of a ‘fuel-efficient vehicle’, announced this week in the Mid-Year Economic and Fiscal Outlook will see a number of vehicles no longer fall into the category.

From 1 July 2025, only vehicles with a maximum fuel consumption of 3.5L per 100km will be included, half of the current maximum consumption of 7L per 100km, meaning fewer makes will be subject to the discount.

The change has been made as part of the nation’s push to net zero greenhouse gas emissions by 2050, incentivising investment in low- and zero-emission vehicles.

In response to the announced change, the Australian Automotive Dealer Association (AADA) encouraged the Government to reconsider its stance on the tax.

“The Australian Government should be encouraging the uptake of fuel-efficient vehicles not increasing the tax on them,” said AACA CEO James Voortman.

“This change will see the Government claw back an additional almost $100 million a year from taxpayers by 2026-27. It is inflationary and will dissuade consumers from buying vehicles with the best safety and fuel-efficient technology.”

The Federal Chamber of Automotive Industries (FCAI) similarly questioned the necessity of pricing consumers out of low-emission technology.

“The LCT penalizes Australian consumers, as it imposes unnecessary additional taxes on many low-emission technology vehicles,” said Chief Executive Tony Weber. “The changes announced today in MYEFO slug Australians with more taxes and make vehicles less affordable. The change to indexation is just another cynical revenue grabbing exercise.” 

Source: Yahoo News | Tax hike to hit one group of drivers

13 December 2023