Arguably the car industry's most controversial tax could be scrapped sooner than predicted, amid confirmation that talks will resume within days on a free-trade deal with Europe.
The end of Luxury Car Tax may be announced within weeks, as Australian trade officials reportedly prepare to travel to Brussels to revive and finalise talks on a free-trade deal with Europe that has been linked to an axing of the controversial tariff.
Reports in recent weeks have revived speculation that Luxury Car Tax (LCT) – a 33 per cent levy on every dollar a new car costs above certain thresholds – will be dropped as part of free-trade negotiations with the EU.
Most LCT-applicable cars come from European car makers, so Federal Government insiders have reportedly expressed a willingness to drop the tax in exchange for better access for Australian agricultural exports into the region.
Overnight, it has been confirmed Australian trade officials will be sent to Europe "within days" to restart talks on a Free Trade Agreement (FTA), after discussions stalled in late 2023.
Agriculture – an issue that contributed to talks halting 18 months ago – remains "one of the sticking points," according to the ABC, but reports say both sides want to reach an agreement.
If the phase-out of LCT remains part of the negotiations, it suggests the demise of the tax could become official sooner rather than later.
"We’ve both agreed now that we’re going to restart negotiations," Trade Minister Don Farrell told The Sydney Morning Herald.
"That’ll be kicked off in the next day or two, when we send our officials to Brussels [to] see if we can scope out what are the outstanding issues."
Speaking on the previous talks to sign a free-trade deal with Europe, the Minister told the publication: "We made progress in the last set of negotiations.
"But the issues that are outstanding are the difficult ones. If this was easy, somebody else would have done it."
Luxury Car Tax was introduced in 1999, and applies at a rate of 33 per cent on the value of cars above a given threshold, which is currently $91,387 for "fuel-efficient vehicles" and $80,567 for all others.
The definition of a fuel-efficient vehicle will change for the new financial year commencing July 1 from a car with claimed fuel consumption of 7.0 litres per 100 kilometres or less, to 3.5L/100km or less.
It means popular hybrids such as the top-of-the-range Toyota Kluger will increase in price as they are slugged with increased taxes.
The Australian has reported that LCT would be slowly wound down, rather than axed in one swoop, but it isn't clear over what period it would occur – assuming it is scrapped in the first place.
The move would be intended to protect vehicle resale values, as dropping the tax in one hit would shave tens of thousands off the price of applicable new cars immediately.
Alex Misoyannis has been writing about cars since 2017, when he started his own website, Redline. He contributed for Drive in 2018, before joining CarAdvice in 2019, becoming a regular contributing journalist within the news team in 2020. Cars have played a central role throughout Alex’s life, from flicking through car magazines at a young age, to growing up around performance vehicles in a car-loving family. Highly Commended - Young Writer of the Year 2024 (Under 30) Rising Star Journalist, 2024 Winner Scoop of The Year - 2024 Winner
