THE NATIONAL CONVERSATION ON TAX

Tax. We all pay it. We all wish we didn’t. But we all recognise it’s necessary to pay for our communal needs such as roads, the police force, fire brigade, hospitals, schools, etcetera.

Once again tax is raising its head as an issue in our country, with the Federal Government considering raising the Goods & Services Tax (GST) from 10 per cent to 15 per cent and broadening it to apply to pretty much everything we buy, including fresh food for the first time ever.

While AADA believes tax reform is necessary and welcomes the discussion, we are dumbfounded as to why one particular tax survives when it is clearly unfair, inequitable, narrow and discriminatory.

We’re talking about the Luxury Car Tax, which raises around half a billion dollars in government revenue per year, or about 0.1 per cent of the total tax take.

Why luxury cars?

For every dollar over $61,884 that your car costs ($75,375 for fuel-efficient vehicles), the government slugs you 33 per cent in Luxury Car Tax. It only applies to motor vehicles. Not to boats. Not to jewellery or real estate or art. Not to your new in-ground swimming pool and tennis court.

Why do we have a Luxury Car Tax but not a Luxury Boat Tax? Why do we have a Luxury Car Tax but not a Diamond Tiara Tax? Where’s the Helicopter Tax? Is that fair?

We don’t think so.

For one, the threshold is too low. Is a $60,000 car really a luxury vehicle these days? Depending on extras, that can include tradesmen’s work vehicles such as a Ford Ranger. Is a twin cab ute a luxury car these days?

It’s an ‘absurd’ tax

Back in 2010 the Henry Tax Review recommended the LCT be abolished, stating that “the LCT’s thresholds may not be an accurate representation of luxury in the car market – for example, a seven-seater family vehicle and a small sports car may both attract similar amounts of LCT”.

Ken Henry, the former Treasury Secretary who headed the review, called the LCT “absurd” and said it penalised “people on average means with a preference for relatively expensive cars”.

Neither a family car like a Toyota Prado nor a work vehicle come under our idea of ‘luxury’ items. Is a LandCruiser a luxury car? A Tarago? If you just go by price, Toyota is Australia’s biggest seller of luxury vehicles.

What is the point?

The LCT was brought in to protect local manufacturers. How did that work out? With vehicle manufacturing set to cease in this country by 2017, why should the LCT continue?

The Henry Tax review agreed with us.

“Because it is levied on a narrow base, the LCT is a higher-cost and less efficient method of raising revenue than more broadly based taxes,” the report said.

“The LCT is also arbitrary in its effect, in that it leads to taxpayers with the same economic means paying different amounts of tax depending on their taste.”

According the Department of Treasury, about 10 per cent of cars sold in Australia attract the LCT. Are one in 10 cars on our roads really luxury vehicles? We don’t think so.

It’s time the Australian Government scrapped this unfair tax.

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