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Benz pushes for tougher luxury car tax break

Fuel’s gold: Mercedes-Benz has suggested that the government should make it tougher for car brands chasing fuel-sipping tax incentives.

Lower fuel-saving tax threshold will help everyone, German luxury brand says

2 Jul 2013

MERCEDES-Benz has a suggestion for the federal government’s punitive tax on fuel-efficient luxury cars – make the economy benchmark even tougher.

David McCarthy, Mercedes-Benz Australia’s senior manager of corporate communications, said the Australian government would do more to cut down on emissions if it imposed even tougher guidelines for meeting tax breaks on fuel-sipping luxury cars He called for the government to cut the current luxury car tax exemption for fuel-efficient vehicles from its current 7.0 litres per 100 kilometre limit to just 5.0L/100km.

As of July 1, Australia’s luxury car tax threshold has risen above $60,000 for the first time as part of an annual financial-year adjustment to the slug to new-car buyers.

However, while the cut-off before buyers have to pay an extra 33 per cent tax on top of GST has risen from the $59,133 set during the 2012-13 financial year to $60,316, the cut-off for fuel-efficient luxury cars – those sipping 7.0L/100km or less – remains at $75,375.

That means while the increase in the luxury car threshold will pass on a $1183 saving to luxury car buyers who fail to qualify for the fuel use exemption, those who do meet the fuel use cut-off will get nothing back.

“Whilst everyone in the car industry acknowledges it (the luxury car tax) is not going to go away, the 7.0-litre limit needs to be indexed properly,” Mr McCarthy said.

“If he (Industry Minister Kim Carr) wants lower emissions, has he considered perhaps a 5.0L/100km limit that has a threshold of $100,000? Because these technologies cost a lot of money,” he said.

“We can already beat that (5.0L) figure. Look at the E300 BlueTec hybrid and the S-Class (limousine), the S300 BlueTec hybrid – they have similar power and substantially fewer emissions than the other models, yet fuel use is in the 4.0L/100km range.”

Mr McCarthy said the government could even consider a two-tier system with both the 7.0L limit at a lower threshold, and the 5.0L limit with the $100,000 trigger.

The tax is set to raise $400 million for the federal government this financial year, down $30 million on last year’s earnings as more luxury cars featuring more advanced drivetrains slip in under the threshold.

Figures supplied by Mercedes-Benz show three out of five cars sold wearing the three-pointed star qualify for the higher tax break because of their lower fuel use.

That includes the entire A- and B-Class city hatchbacks, most of the C-Class sedan and wagon range, several E-Class and CLS-Class models, and even a high-rolling S-Class saloon.

Over at BMW, more than half the cars it sells slip in under the current 7.0L threshold.

Product communications manager Scott Croaker said any revision to the current 7.0L limit would need to be considered before it was made tougher.

“Reducing that to 5.0L/100km would take away some of the benefit of those (fuel-efficient) cars.

“It’s also our belief that the LCT is an outdated tax because nearly all of the cars these days in the market come under that financial threshold, so there are certainly better ways to incentivise lower-emission and more fuel-efficient cars,” he said.

A Lexus spokesman said the brand would have six models slipping in under the 7.0-litre threshold by the first quarter of next year after having only one vehicle qualify just four years ago.

“The first car we launched that was able to receive that exemption was the RX hybrid (SUV), because in one generation it went from something like 7.9L/100km to 6.3L.

“In the space of two years we took a good 2.0L off that car, and who knows what is going to happen next?“Invariably fuel efficiency for all marques is improving, and whether that (7.0L/100km) figure needs to be reviewed, I suppose, is something that people have to consider.”

The spokesman said Lexus would pass on the full cost saving to customers.

While some car-makers will cut prices, others such as Audi – it has 40 models on sale here that slip in under the 7.0L limit – will pass it on in kind.

Audi Australia corporate communications executive Shaun Cleary said his company would use the tax difference to reward customers.

“We won’t reduce the retail price with the change in the luxury car tax, but we will add extra equipment as part of our model-year 2014 update,” Mr Cleary said.

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