Luxury car tax hike all but official

THE Rudd federal government’s controversial fight to raise from 25 to 33 per cent the luxury car tax (LCT) payable on new vehicles priced above $57,180 finally appears to have been won.

An exemption for farm and tourism vehicles is likely to secure the deciding vote from Family First Senator Steve Fielding when an amended LCT bill goes before the Senate on Tuesday (September 23).

The bill reached its third reading stage in parliament today (September 18), but is not expected to be put to a Senate vote until after parliament’s next sitting – Monday, September 22.

The Victorian Farmers Federation (VFF) was among the first groups to endorse the exemption for farmers and tour tourism operators, who will now get a $3000 rebate.

“Our industry is dependent on transport and, obviously given the localities and isolated areas not only within the state of Victoria but nationwide, is dependent on large robust vehicles,” said VFF president Simon Ramsey today.

However, Federal Chamber of Automotive Industries (FCAI) chief executive Andrew McKellar said that while the amendments negotiated by Nationals Senators go further than Senator Fielding’s proposals, which affect only GST-registered farmers and tourist operators, they did nothing for others in the bush.

“More four-wheel drives are affected by this unfair tax hike than any other vehicle,” said Mr McKellar. “Some amendments are claiming to protect those who live in rural and regional areas, but are in fact extremely narrow and will assist only a small number of people.

“We must not get into a situation where there are two classes of people living in country areas. It is one thing to protect farmers from this unfair tax hike, but what about the other families the doctors, teachers and nurses who live and work in rural and regional areas.

“They also need the safety and security of a four-wheel drive and should not be penalised by this unfair and damaging tax hike.

“The amendments suggested by the Nationals will do far more to protect people in rural and regional areas from this unnecessary tax hike than the deal struck between the government and Senator Fielding,” he said.

The FCAI chief also questioned whether the Australian Greens will use the first opportunity to exercise their balance of power in the new Senate to support increased carbon emissions from the transport sector.

“Will the Australian Greens support Senator Steve Fielding’s proposed amendment that provides a tax break to large SUVs?” he asked.

“For the Greens to support such a move would more than offset the impact of their own deal struck with the government to exempt a very limited number of fuel-efficient cars.

“There are many more vehicles that have lower carbon emissions and environmentally-friendly technology than the ones that would be exempt under the Fielding deal that will be slugged with the tax hike, including hybrids.

“It seems extraordinary that the Greens could consider supporting an amendment that would have a negative impact on the environment.

“There is a real risk that all the conflicting amendments could turn the legislation into a dog’s breakfast and I urge all senators to remain consistent and true to their principles,” said Mr McKellar.

The FCAI continues to call for the abolishment of the LCT completely, while other groups including the Victorian Automotive Chamber of Commerce (VACC) have called for the threshold to be raised to at least $75,000.

The FCAI now hopes the LCT will be eliminated as part of a wide-ranging review of the Australian taxation system by Treasury chief Ken Henry, whose inquiry is due to be tabled in full late next year.

Applicable retrospectively from July 1, the higher rate of tax is expected to raise an additional $130 million this financial year – on top of the $440 million it raised in 2007-08.

The LCT was first introduced by the Hawke Labor government in the 1980s and has earned billions of dollars in revenue ever since.

It is understood the previous Howard Liberal government had planned to abolish the tax as part of the introduction of the GST, but fears for the future of the used luxury car market following the plummeting resale values that would have followed prevented that from happening.

Last year about 100,000 vehicles or 12 per cent of the total market incurred luxury car tax – up from 4.5 per cent in 1986.

The most popular five vehicles to incur LCT in 2007 were Toyota’s LandCruiser (with around 6000 sales), the BMW 3 Series, Toyota Prado, premium versions of Holden’s Commodore and the Mercedes-Benz C-class.

Read more:

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LCT uncertainty to linger on

LCT compromise on the cards as sales plummet

Senate hears final LCT pleas