AADA is investigating the possibility of mounting a High Court challenge against the Victorian Government’s planned increase of stamp duty that will effectively act as a further Luxury Car Tax.

AADA is consulting with legal experts to determine whether states have taxing powers under the Australian Constitution.

Victorian stamp duty is currently 4.2 percent of the total cost of cars below the federal LCT threshold of $66,331 and 5.2 percent for cars over this amount. The Victorian Government’s May budget stated that it would increase the stamp duty on cars over $100,000 to 7 percent, while for cars selling for more than $150,000 stamp duty would rise to 9 percent. These changes will take effect from 1 July 2019.

This comes a year after Queensland introduced an extra 2 percent stamp duty on vehicles priced over $100,000.

With the NSW Opposition proposing a similar stamp duty increase before it was defeated in this year’s election, AADA CEO, David Blackhall, said the Association is concerned other states might follow suit. AADA is, therefore, considering a constitutional challenge over what is effectively a state-based LCT.

There are already so many taxes on cars in Australia: a 5 percent tariff on cars imported from the UK and Europe, 10 percent GST plus the Federal Government’s 33 percent LCT on vehicles over $66,331. AADA considers this ‘Luxury’ Car Tax especially unfair considering the numbers show that Toyota customers pay more in LCT than most buyers of prestige brands.

The Sydney Morning Herald and The Age recently revealed that Toyota customers collectively pay more than buyers of Ferraris, Porsches, Lamborghinis and most other prestige brands under the Federal LCT.

Mr Blackhall said if Victoria was allowed to effectively add its own LCT, other states and territories would follow suit, adding to the already unfair impost on Australian motorists and automotive Dealers. Western Australia already imposes 6.5 percent stamp duty on new cars priced over $50,000.

“Treasurers are treasurers; once they see one of their counterparts dip into the car buyer’s wallet, our concern is it will become contagious and other states might get the same idea,” Mr Blackhall said.

“We are taking advice on the legality of what’s happened, and there are serious-minded, well-informed senior counsel talking to us about aspects of this tax that may be in breach of our Constitution.”

It is unclear whether it is possible to challenge a government regarding the legality of a tax, but Mr Blackhall said AADA is determined to find out exactly what taxing powers state governments have under the Constitution and, if necessary and feasible, take that challenge all the way to the High Court.

The potential ramifications of an increase in stamp duty by one state could include consumers purchasing their new vehicle in another state, buying a car below the threshold or exploiting other loopholes, including enlisting the help of Dealers to avoid the higher stamp duty.

One factor that might assist AADA in this fight is the negotiations regarding a Free Trade Agreement with Europe. Vehicles imported from Japan, Thailand, South Korea and the USA are tariff-free, but those from the UK and Europe still attract a 5 percent import tariff.

The EU is likely to regard the Federal LCT and state stamp duties as ‘discriminatory tariffs’ and could pressure the Australian Government to remove or reduce them.