The car industry has slammed a proposal by the Victorian Government to slug vehicles priced over $100,000 with an additional tax – on top of the 10 per cent GST on the total cost and 33 per cent Luxury Car Tax already charged on every dollar above $66,331.
UPDATE, 27/5/19: The Federal Chamber of Automotive Industries (FCAI) has made a statement regarding the proposed changes to taxes on new vehicles in Victoria. See bottom of article for details.
The “tax on a tax on a tax” is expected to be announced Monday as part of the Victorian Government’s state budget and could come into force in a matter of weeks, from the beginning of the new financial year starting July 1.
Sales of new motor vehicles in Victoria have slumped 10 per cent year-to-date – slightly more than the national average of 8 per cent – and the industry says the new tax will slow its chances of recovery.
The Victorian Government is trying to fill the void left by a $5.2 billion drop in stamp duty revenue due to the housing market decline.
In a budget forecast leaked to news media on Sunday, the Victorian Government estimates the tax on new motor vehicles priced over $100,000 will bring in $260 million next financial year.
By comparison, the Federal Government raised $695 million across all states and territories in the 2017-18 financial year, representing 0.166 per cent of total taxation revenue.
As this article was published, the Victorian Government was yet to outline the rate of the additional tax on vehicles priced over $100,000.
However, leaks to the news media on Sunday indicated low emissions vehicles, motorhomes, primary producers and “dealer demonstrators” would be exempt.
If the latter is true, it is possible the car industry could circumvent the new tax by registering vehicles as demonstrator models before selling them to customers.
If the Victorian Government’s tax plan goes ahead, it will be the second state in Australia to introduce a “tax on a tax on a tax” on vehicles priced above $100,000.
Queensland introduced a similar tax on 1 July 2018 after announcing the proposal two days before the most recent Queensland election in November 2017.
In the lead-up to the NSW election in March 2019, the opposition proposed an additional 7 per cent tax on vehicles over $100,000, but the plan was quashed after they were defeated at the polls.
Australian Automotive Dealer Association CEO David Blackhall said reports of an extra tax on new vehicles priced over $100,000 in Victoria was “incredibly concerning for an industry which is currently doing it tough”.
“The new car retail industry in Victoria has contracted by more than 10 percent year-to-date, the most of any state in the country. Now is not the time for a tax grab, with people’s businesses and jobs at stake,” said Mr Blackhall.
The AADA represents 1500 dealer groups covering 3500 new-car showrooms and more than 50,000 employees nationally, including 14,000 dealership workers in Victoria alone.
“Victorian motorists have experienced significant hikes in duties under this Government and have made a strong contribution to the state’s coffers by paying rego and duties, while also shelling out GST, tolls and fuel taxes. At some stage you have to say enough is enough,” said Mr Blackhall.
“This will be framed as a tax on luxury vehicles which will fall on wealthy individuals, but it is well known that these vehicles are often purchased by businesses. This will simply constrain economic activity,” Mr Blackhall said in a media statement.
The AADA also claimed the additional tax will “discourage people from buying some of the safest vehicles available in Australia”.
“This is not a good outcome for a jurisdiction which, according to the Australian Automobile Association, is struggling to meet (road toll) targets under the National Road Safety Strategy,” said Mr Blackhall.
The AADA added: “There is already a Luxury Car Tax which is levied by the Federal Government and this duplicate tax will only add to the cost of vehicles with advanced safety and fuel efficiency features”.
“This is of course, a tax on a tax on a tax – triple taxation, since stamp duty compounds on both GST and the Federal Luxury Car Tax. It’s a bad tax, a poor policy choice and will hurt the new car retail industry,” said Mr Blackhall.
Earlier this year CarAdvice exclusively revealed that Toyota customers are paying more in Luxury Car Tax than buyers of most prestige brands.
The special investigation by CarAdvice found Toyota customers paid $99.7 million in LCT last year compared to $97 million for Porsche, $84.5 million for BMW, $81 million for Jaguar/Land Rover and $45 million for Audi.
Buyers of supercars and limousines contributed a fraction of the LCT paid by Toyota customers in 2018.
Figures obtained by CarAdvice showed Ferrari buyers paid more than $30 million in LCT in 2018, while Maserati customers contributed $18 million, ahead of Bentley ($17 million), Lamborghini ($14 million), Aston Martin ($13 million), McLaren ($7.5 million) and Rolls-Royce ($6 million).
The only motorists who paid more in Luxury Car Tax than Toyota customers last year were Mercedes-Benz buyers, who topped the list at $170 million.
In bizarre twist, only three Toyota models are subject to LCT but dozens of cars from prestige brands are not slugged thanks to a loophole in the tax regulations that favour certain types of luxury cars.
UPDATE: On Monday morning the car industry lobby group, the Federal Chamber of Automotive Industries (FCAI), added its concern to the proposal by the Victorian Government to add a tax to new vehicles priced beyond $100,000.
“It is money grabbing at its worst,” said Tony Weber, chief executive of the FCAI. “But what’s more disturbing is that it is a tax on safety and technology. It targets vehicles that introduce innovative safety and technical features to the market.”
The FCAI said the vehicle which attracts the most LCT is a Toyota LandCruiser, “a popular vehicle for families and landholders. Hardly a luxury vehicle,” said Mr Weber.
The Luxury Car Tax was originally implemented To protect Australia’s vehicle manufacturing industry.
However, car manufacturing in Australia finished in 2017, “which makes LCT redundant”, said Mr Weber.
“Importantly, an Australian LCT could stand in the way of the development of a European Free Trade Agreement,” said Mr Weber. “The fact that States and Territories are now considering and implementing this tax is beyond rational belief.”