Luxury Car Tax: Do we really need it on imported cars into Australia?

In Australia, the levy imposed on luxury cars is criticised by consumers for being extortionate and unwarranted. Cars are the only item in Australia in which a tax is imposed based on their implied ‘luxury’. Australian consumers also pay LCT on cars that many would not classify as luxurious.

In addition to the LCT, Australian motorists have other taxes: Good and Services Tax (GST), stamp duty and registration fees when importing a new car, road tolls and a substantial tax on fuel.


Luxury Car Tax


New-vehicle buyers should not be the only buyers to pay an additional luxury tax; particularly using a subpar system that is not well designed.

The punitive tax rate was increased to 33 percent in 2008. Originally, it was 25 percent on the value of the vehicle above the threshold.

Compliance to the Luxury Car Tax ignores the fact that cars in this class offer lots of advantages, including several safety, environmental and theft-reduction benefits.

For instance if you decide to buy and ship a car from the UK to Australia for $100,000 in Australia, you must pay an additional cost that represents 20 percent of the original price of the car. In fact, you will pay around $7500 in luxury car tax, $9000 in GST and $3000 in stamp duty. This is all before paying $1000 to register it!

LCT doesn’t only target buyers of real luxury cars: Mercedes Benz, Jaguar, Aston Martin… it also affects the buyers of Toyotas, Nissans, Jeeps, Volkswagen. Indeed, Toyota buyers pay more tax than any consumer of other car models. This is not down to Toyota’s being particularly luxurious, but the fact that Luxury Car Tax is applicable at cars valued just under AU$62,000.

For the 911 Porsche buyers, the tax burden is excessive. They will pay around AU$47595 in LCT, $8000 in import duty, $13220 in stamp duty and a GST of $25668.

However, shortly the restrictions should be lifted on imported cars to Australia and the next step is expected to be the abolition of the LCT tax on high end cars.


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