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Luxury car tax debate snowballs

Tax hike: Roy Morgan says government has "misread" the proposed LCT hike's impact, which it says will affect sales of "luxury" vehicles, including Toyota's LandCruiser.

New research shows working families to be hardest hit by LCT rise, as senate debates

General News logo17 Jun 2008

AS CONTROVERSIAL legislation to increase the luxury car tax (LCT) threshold was on the verge of being redirected to the Senate economics committee tonight, Roy Morgan Research data obtained by GoAuto showed that “working couples” were likely to be the hardest hit by the proposed change.

In analysing 2007 research data of consumers intending to purchase a vehicle priced over $50,000 in the next four years, Roy Morgan Research found that these consumers were – unsurprisingly – typically married (86 per cent), male (71 per cent) and over 35 years old (80 per cent).

However, according to Roy Morgan Research consultant Sak Ryopponen, further analysis revealed that the consumer group tended to rely on a dual household income to fund the purchase – and that a large percentage were in the prime mortgage-holding age bracket and had children living at home.

As a result, Mr Ryopponen suggested that the federal government may have “misread” the impact of its proposed LCT increase, which, if the bill passes, will raise the tax paid on the portion of a car’s sale price over $57,123 from 25 per cent to 33 per cent from July 1.

“A deeper look at the profiles of these intenders reveals that with individual and total household mean incomes of $86,000 and $135,000 respectively, it is clearly the dual income that is funding the ability to purchase a ‘luxury’ vehicle,” Mr Ryopponen said.

“Further, with 40 per cent of these intenders in the prime mortgage-holding age group of 35-to-49, and 40 per cent still with children under 16 in the household, buying and running a high-priced vehicle is unlikely to be a walk in the park.

“Increased belt-tightening by these intenders is already evident, with 59 per cent of those intending to spend $50,000 to $75,000 on a vehicle agreeing with the statement ‘Recently I have cut down on my spending’ in March this year.

“Add to this the recent fuel price increases and the potential impost of increased LCT, and surely sales volumes will begin to be negatively impacted, thereby decreasing government tax revenue.

“The government does appear to have misread the impact on the market,” he said.

The Coalition was this week attempting to use its majority in the Senate – now in its final fortnight of sitting before the winter break – to delay the passage of the LCT-related budget legislation by introducing a motion to refer the bills to the Senate economics committee.

Tonight, the Senate was continuing to debate the motion, which if passed would defer the implementation of the LCT increase at least until after the committee reports back to the Upper House by August 26.

A strident opponent of the proposed LCT increase, the Federal Chamber of Automotive Industries (FCAI) chief executive Andrew McKellar told GoAuto that a reprieve would allow it – and other groups – to “bring forward evidence about the adverse impact of the proposed tax increase”.

“It will give us the opportunity to undertake the consultation that was denied in the first place,” Mr McKellar said.

“Obviously, we will have to bring forward substantial supporting evidence about the impact – and we will expect that the Senate will look at that seriously. We would be hopeful that once they’ve had a chance to evaluate that evidence of the adverse impact of what’s proposed, they will see fit to recommend a very different outcome.” Yesterday, ABC radio quoted Coalition Senate leader Nick Minchin as saying that some budget measures – including the LCT increase – needed longer scrutiny.

“We do think that it is proper that significant pieces of legislation should be properly considered rather than just rammed through the Parliament without any debate whatsoever,” Senator Minchin said.

Luxury car consumers: People intending to spend $50,000+ on their next vehicle
Male 71.4%
Male aged 25-49 40.8%
Married/de facto 86.2%
Average income (all people) $85,800
Average h/hold income $134,650
More than one h/hold income 69%
Children U16 at home 39.6%
Household lifecycle:
Young parents 26.5%
Mid-life families 13.0%
Mid-life households 38.7%
Source: Roy Morgan Research, June 2008

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