The Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016 provided for an exemption for certain public institutions that import or acquire luxury cars for the sole purposes of public display. Currently, if a public museum or art gallery imports a car for display and it is over the $63,184 threshold, the museum or gallery will have to pay luxury car tax (LCT).
In the Second Reading Speech by the Minister for Small Business and Assistant Treasurer, the Hon Kelly O’Dwyer MP stated that, “Relief from luxury car tax will only be available for cars acquired solely for the purposes of public display. The cars must be exhibited or shown in an environment that is accessible to the general community; for example, display in a museum that is open to the general public”.
It is expected that in most cases the reason a gallery, museum or library will display a car is because of its cultural or historic significance.
The Bill has lapsed with the prorogation of the Parliament.
Federal Budget – relevance to the automotive industry
According to some sources the Budget is a safe political package for the Government, in that the major beneficiaries are those individuals and small businesses that receive immediate tax cuts. The major targets of the Government are the well-off with superannuation limits and new taxes.
The LCT take by the Government in 2015-16 is estimated to be $580 million ($520m in 2014-15), growing to $630m over the forward estimates.
Excise on petrol and diesel is estimated to be $6,200m and $9,460m respectively in 2015-16, growing to $7,550m (petrol) and $11,620m (diesel) over the forward estimates.
Passenger motor vehicle duty receipts are forecast to drop significantly from $732m in 2014-15 to $570m in 2015-16, arising largely as a result of the number of Free Trade Agreements Australia now has in place. Receipts will rise, however, to $760m over the forward estimates.
Government modelling has estimated that 30,000 new or near new vehicles will be personally imported under recent announcements. LCT will not be collected by the Australian Taxation Office and concerns have already been expressed about the ability of the collection agency to identify split invoices and other methods to avoid this inequitable, complex and absurd tax.
The Budget papers can be found at: http://www.budget.gov.au/
Vehicle emissions discussion paper – February 2016
To encourage the use of fuel efficient motor vehicles in Australia, the Government currently applies a higher LCT threshold (currently $75,375, GST inclusive) for luxury cars with fuel consumption less than 7L/100km. For other vehicles the threshold is $63,184 (GST inclusive).
Most developed countries have now adopted noxious emissions standards based on or equivalent to Euro 6 emissions standards for light vehicles. If, as proposed, Australia is to adopt Euro 6 emissions standards, our petrol quality must improve and will require further investment by Australian refineries. Based on sulphur limits in petrol, Australia is ranked at 63 in the world. The current maximum sulphur limit in Australia is set at 150 parts per million (ppm) while Euro 6 requires a sulphur limit of 10 ppm.
AADA’s submission to the discussion paper stated:
Taxation as a policy instrument has been used on many occasions, both as an incentive and disincentive, to alter consumer behaviour or protect certain sectors of the economy. Many overseas countries and states provide taxation incentives to promote the use of alternative fuels and electric vehicles.
It is estimated that 20 per cent of the cost of a new motor vehicle includes a range of taxes levied by the Australian Government, States and Territories. Where applicable, taxes would include Australia’s ‘absurd’ LCT. This tax impost limits the availability to the consumer of a vehicle containing the latest safety and emissions technology.
AADA and many other bodies have for many years been advocating for the removal of the tax, which contributes around $500 million a year to government revenue. As a minimum, the LCT thresholds should be raised or removed in respect of fuel efficient vehicles.
The Vehicle Emissions Discussion Paper can be accessed at: https://infrastructure.gov.au/roads/environment/forum/files/Vehicle_Emissions_Discussion_Paper.pdf