AADA is disappointed the Federal Budget has retained inefficient new car taxes and missed the opportunity to reward consumers and local businesses.
“The first budget since the cessation of local passenger vehicle manufacturing provided the Government with an opportunity to modernise the taxation regime for new cars,” said AADA CEO, David Blackhall.
“Unfortunately, both the passenger vehicle tariff and the luxury car tax remain on the books and will collectively generate almost $1.3 billion in 2018-19, significantly more than previously forecast.
“The sale of new cars brings significant societal benefits, as they are safer, more environmentally friendly and more fuel efficient. Improving road safety, reducing vehicle emissions and bringing down energy costs are all Government priorities and these taxes hinder progress towards these goals.”
Mr Blackhall said that increased taxes on the sale of new cars by various levels of government simply force consumers to pay more and, in the process, hurting many of the people working in the automotive industry, such as sales staff, finance providers and workshop technicians.
We support the Government’s ongoing commitment to extend company tax cuts to firms with turnover over $50 million. Due to the high value of their stock, new car franchised Dealers often have high turnover but much lower profit margins, and a corporate tax cut would benefit local car Dealers and the tens of thousands of people they employ,” Mr Blackhall said.
Luxury Car Tax (LCT) and Passenger Vehicle Tariff (PVT) retained
Despite the cessation of local vehicle manufacturing, both the LCT and the PVT have been retained. Collectively, both taxes will raise $1.27 billion in 2018-19.
The LCT will generate $740 million in 2018-19, $40 million more than forecast in the Mid-year Economic and Fiscal Outlook (MYEFO).
The LCT is forecast to grow over the forward estimates to $830 million by 2021-22.
The tariff on motor vehicles will raise $530 million in 2018-19, $50 million more than forecast in MYEFO.
“LCT receipts are forecast to grow by 7.0 percent in 2017-18, consistent with strong growth in prices of vehicles subject to LCT,” the Budget papers say. “Since the 2017-18 MYEFO, forecast LCT receipts are $50 million higher over the four years to 2021-22.”
The tariff is forecast to decline over the forward estimates to $400 million by 2021-22.
Record growth set to continue
The Australian economy has entered its 27th consecutive year of growth. Real GDP is forecast to grow by 2.75 percent in 2017-18 and is forecast to accelerate further to 3 percent growth in 2018-19 and 2019-20.
The underlying cash balance is forecast to be a deficit of $14.5 billion in 2018-19. The underlying cash balance is expected to return to a budget balance in 2019-20. An underlying cash surplus is projected in 2020-21, growing to more than 1 percent of GDP in the medium term.
These projections are consistent with the Government’s fiscal strategy, which requires that tax receipts do not exceed 23.9 percent of GDP throughout the medium term.
The Government is providing income tax relief, which includes immediate relief of up to $530 per annum for low and middle-income earners, helping to protect Australians’ earnings from bracket creep by increasing thresholds and ensuring more Australians pay less tax by making personal taxes simpler and flatter.
From 1 July 2024 the personal income tax system will be simplified by abolishing the 37 percent tax bracket entirely, reducing the number of tax brackets from five to four.
Break for business
The budget lowers taxes for small and medium-sized businesses as part of the Enterprise Tax Plan and the Government will continue to seek full implementation of the tax plan (businesses with turnover more than $50 million).
The budget will extend the $20,000 instant asset write-off for businesses with a turnover of up to $10 million, to apply in 2018-19.
The budget will invest $75 billion in transport infrastructure over the coming decade.
The budget will be implementing a number of recommendations of the Black Economy Taskforce Final Report.