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LCT hike not dead

Taxed: Toyota's entire 200 Series range is priced above the LCT threshold.

Government's $555m Luxury Car Tax hike heads to senate, where FCAI vows to fight it

General News logo3 Jun 2008

THE Rudd government’s controversial Luxury Car Tax (LCT) increase has passed the House of Representatives and will now be debated in the senate immediately prior to its proposed introduction on July 1.

In his May budget federal treasurer Wayne Swan increased the LCT, paid on the portion of a car's sale price over $57,123, from the current 25 per cent to 33 per cent - calculated after the 10 per cent GST has already been added to the price - for vehicles delivered after July 1.

A report in The Australian newspaper on May 28 claimed the federal government had backflipped on its proposed new $555 million luxury car tax, which has been criticised by all major luxury car brands, by referring it to a review of the tax system being conducted by treasury secretary Ken Henry.

However, having passed the House of Representatives, the new LCT bill will now be debated in the senate, where the Federal Chamber of Automotive Industries (FCAI) will lobby for it to be debated before being referred to an inquiry.

“The legislation has passed the House of Representatives but what we are pushing for is that there is the opportunity when it comes to the Senate the week after next to refer that legislation for a proper inquiry,” FCAI chief executive Andrew McKellar told GoAuto this week.

“This measure was announced with no consultation for industry, for motorists, for other stakeholders and there are affected groups out there.

“One of the issues that did come out of the debate in the House of Representatives is that there was considerable focus on the impact that this has particularly on four-wheel drove products which are targeted to rural and regional communities and there is a significant impact there.

“That’s one of the issues that we think desperately needs to be looked at in more detail to ensure that people who live in those areas, where that kind of vehicle – whether it be a Patrols or a LandCruiser or whatever – is not a luxury, but a necessity.” The current LCT threshold is already lower than the least expensive version of Toyota’s 200 Series LandCruiser wagon, which is priced at $69,990, and the cheapest LandCruiser Troop Carrier ($60,490). The only LandCruisers currently priced below the LCT cut-off are the 70 Series Workmate wagon ($54,490) and the cab-chassis utility range ($53,990-$56,990).

80 center imageLeft: FCAI chief executive Andrew McKellar.

“Our research shows that there is every likelihood that if the current trends continue almost every vehicle in the LandCruiser range will be captured by this tax certainly within 10 years,” said Mr McKellar.

“As we know much of the advances in technology enter through those (luxury) segments in the market and the last thing we want to do is penalise innovation, whether it be in terms of environmental performance or safety.

“We want the senate to pause and have a look at those issues. We want to give people in the industry the opportunity to put their case. The government did not take the time or trouble to actually ask some of these questions before it came out and announced this measure.

“The bill to introduce the rate increase was introduced to the House of Representatives and the government of course has the majority in the house, so they have passed the legislation through there.

“It now comes to the senate in just under two weeks’ time. The senate however is a different creature. The government does not have the majority in the senate and if it is going to secure passage of this legislation it needs the support of the senate.

“What we are arguing is that the opposition and the independents in the senate have the power to stop this legislation at that point and to ask some questions about it, and that’s what we’re asking them to do.” Mr McKellar said the FCAI’s long-standing position remained to abolish the LCT altogether, but that because the senate does not have the power to do so, it should be referred to the Australian tax review that begins next month but does not report to government until the end of 2009.

“Our position is that the tax should be abolished – that’s been our long-standing position. But for that to occur, you would need the support of the government at the end of the day.

“The senate has the power to review the legislation that is now put forward by the government to increase the rate. We will be putting forward the case that this legislation is flawed, that it has unintended consequences and that it should at the very least be amended.

“There are several opportunities where that case can be put. Obviously we’ve put that argument to the Bracks review and there is the review of Australia’s future tax system, which being chaired by treasury secretary Ken Henry.

“Clearly we have a measure that is in the parliament at the moment and our first concern is to address at the very least some of the negative impacts of that, but that doesn’t change the underlying argument that the tax in the first place is a bad, unnecessary and an unjustified tax that should be abolished,” said Mr McKellar.

In other FCAI news, Mr McKellar said he was unaware of industry speculation that the LPG subsidy may in fact be reduced from July 1, following similar reports in the lead-up to the May budget, which made no change to the current arrangement that allows for a $2000 rebate on LPG conversions and a $1000 rebate on new LPG cars.

“I’m not aware of that and if that is the case it would greatly surprise me because I would have thought the place the government would announce that is in the budget.

“Again the issue here is consultation and what I’m sad to see is that where the government is taking policy decisions and introducing policy measures that there’s a proper process of consultation.

“The Bracks review is due to report in July and I would have though issues like LCT and LPG are within his terms of reference.

“So I don’t know where the rumours are coming from and I trust that they are unfounded,” he said.

Read more:

Industry states its case to Bracks review

Luxury tax backlash

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