Some new car buyers will save nearly $1,700 in luxury car tax and stamp duty, following the largest LCT threshold increases in recent years.
Biggest Luxury Car Tax (LCT) Threshold Increases in at least a decade save nearly $1,600 for buyers of certain fuel-efficient cars – before the application of lower stamp duty rates.
However, the controversial tax continues to be criticized as an outdated “tax on a tax”, as it was introduced to protect a local auto industry that has since died.
As reported last month, the LCT threshold increased by its largest margin in at least 10 years for the current 2022-23 fiscal year, rising 3.9% for most vehicles, or 6.6% for vehicles with combined fuel consumption ratings of less than 7.0 liters per 100 km.
This means the tax – which adds a 33% tariff to every dollar above the threshold – now applies to standard vehicles priced at $71,849 (compared to $69,152) or $84,916 for aforementioned “fuel-efficient vehicles” (vs. $79,659).
The increased thresholds come with reductions in the applied LCT, with buyers of “fuel efficient” vehicles (including electric cars) being able to save up to around $1,575 in LCT, while buyers of less efficient vehicles could save up to $810.
The biggest savings apply to vehicles priced above the old and new Luxury Car Tax thresholds – although buyers of cars priced between the two thresholds will also benefit from a reduction price, although to a lesser extent.
These savings will also reduce the amount of stamp duty paid on each new car purchase, as the LCT is applied to the purchase price of motor vehicles, including the luxury car tax.
The exact savings differ from state to state due to stamp duty variations across borders.
However, as an example, a buyer of a $90,000 electric vehicle in New South Wales or Victoria could expect to save around $80 in stamp duty, once the lower LCT rates are applied.
The luxury car tax applies to the base price of the vehicle, including GST, plus dealer delivery charges – between $2,000 and $4,000, depending on the brand – and any installed cost options, such as as metallic paint, option packs or other accessories.
Hybrid or electric vehicles previously above the 2021-2022 LCT threshold of $79,659 – but now below the new marker of $84,916 – include the Tesla Model 3 Long Range ($81,725 after ordering/delivery fees) and the Lexus NX350h F Sport/Sports Luxury hybrids (about $80,500).
A number of European luxury cars with frugal (but not hybrid) gasoline engines also squeeze in under $84,916, including the best-selling BMW 330i (around $82,000), Mercedes-Benz C200 (also around $82,000). $000) and Audi A5 Sportback 40 TFSI (about $80,500).
Meanwhile, below the new $71,849 threshold for all other vehicles, non-LCT cars now include the Audi SQ2 ($70,400 with dealer delivery) and Genesis GV70 2.5T RWD ($69,400) .
Some cars previously priced between the old and new thresholds were hit by price increases from July 1, pushing them above the new LCT baseline – while others, like the Kia Sorento PHEV, received price increases less than their discount to LCT, which means they are cheaper to buy once all running costs are added.
The above prices include the dealer’s estimated delivery charges (based on manufacturer data on their websites or provided to the red book guide) but exclude all optional extras.
The luxury car tax was introduced alongside the Goods and Services Tax (GST) in 2000, to counter the removal of other taxes on imported vehicles.
With 33% LCT and 10% GST, it was hoped that luxury and sports cars would be priced higher, giving some protection to Australian-made cars, most of which were priced below the LCT threshold.
While LCT thresholds have increased over the past two decades with inflation and market changes, during this period large-scale Australian car manufacturing has ceased and new car prices have risen beyond the rate of inflation, putting the tax under fire.
However, the luxury car tax generates nearly $1 billion in annual revenue for the federal government – funds that would have to be clawed back elsewhere if the tax were to be removed.
The Federal Chamber of Automotive Industries (FCAI) has called the luxury car tax “an inefficient, punitive and ill-conceived tax which causes a significant distortion in the Australian automotive market”.
Meanwhile, Australian Automotive Dealers Association CEO James Voortman said Conduct in March: “The prices of vehicles currently subject to the luxury car tax would certainly drop [if it was scrapped] … The main beneficiary would be the customers because they are the ones who absorb the LCT…”.