LCT threshold $1667 higher

THE Australian Taxation Office upped the luxury car tax (LCT) threshold from $57,466 to $59,133 on July 1, but the bar for cars consuming less than seven litres of fuel per 100 kilometres remains at $75,375.

When the threshold changed for the 2010/2011 financial year, the ATO used the motor vehicle purchase sub-group of the consumer price index (CPI) to calculate the increase.

This time, the All Groups CPI was used to calculate the basic threshold, its 1.029 indexation factor resulting in the $1667 increase.

Meanwhile, the ‘fuel efficient’ threshold retains its tie to the motor vehicle purchase index, its factor of 0.975 resulting in no change because the factor was less than 1.0.

GoAuto understands the change will result in an LCT saving of around $500 on cars breaching the threshold, while buyers of cars priced close to the threshold will be able to specify up to $1667 worth of optional extras before becoming liable for the charge.

The Australian Ford Territory diesel 2WD – which does not qualify for the efficiency threshold due to its 8.2L/100km fuel consumption figure – is one vehicle that will become LCT-free. Its list price of $58,240 is currently subject to a $179 LCT liability.

Former Federal Chamber of Automotive Industries CEO Ian Chalmers told the Cars of Tomorrow conference in March that prime minister Julia Gillard had suggested the LCT would be considered for withdrawal once a federal budget surplus is achieved.

The FCAI told GoAuto it “supports any action that results in the LCT thresholds being increased”, but believes the new thresholds are still too low.

“At the current levels, many mid-series models will incur LCT charges that will need to be paid by the average motorist,” it said.

Toyota, Mercedes-Benz, BMW and the FCAI have all publicly expressed opposition to the tax.

At a tax forum in Canberra last October, Mr Chalmers said 14 per cent of new vehicles sold in Australia were subject to LCT compared with just 2.9 per cent when the levy was introduced.

Speaking at the forum, former head of treasury Ken Henry, who authored the 2010 Henry taxation review that recommended the abolition of LCT, labelled the tax “truly absurd”.

Toyota Australia executive director of sales and marketing Matthew Callachor last week issued a statement slamming the small LCT change.

“Despite the small increase to the threshold, the luxury car tax is still an inefficient, punitive and poorly designed measure,” he said.

“It is discriminatory because it applies only to vehicles, and the arbitrary threshold is not set at a level that most people would consider a luxury car.

“Not only that, it is a tax on a tax. Motorists already have to pay GST, stamp duty and registration fees when buying a new car, as well as a hefty tax on petrol.

“Even with the latest threshold adjustment, this unfair tax has not been consistent with inflation since it was introduced in 2000.”

Mr Callachor confirmed the $500 LCT saving will be applied to 20 Toyota vehicles affected by the threshold change, including several Prado, Kluger, Tarago and LandCruiser 200 series variants.

Like the aforementioned Ford Territory, Toyota’s Prado GX diesel automatic now falls below the LCT threshold, resulting in a $236 price reduction.

Several recent Mercedes-Benz product press releases have included the company’s strong views on LCT, describing it as “a tax on technology and safety” that no vehicle purchaser should have to pay.

Mercedes-Benz Australia/Pacific senior manager of corporate communications David McCarthy told GoAuto a meeting will take place this week to decide on how the LCT change will impact pricing.

BMW Group Australia head of corporate communications Piers Scott confirmed “every cent” of LCT savings will be passed on to customers.

During a recent interview with GoAuto, BMW Group Australia managing director Phil Horton described the LCT as “scandalous” and “iniquitous”, with little of the revenue used to benefit Australian motorists.

Audi Australia has also announced it will pass on the $500 LCT saving to customers.