Family SUVs set to be slugged with additional tax from next year
Government revisions to Luxury Car Tax from 2025 will increase price on some of the most popular vehicles – even hybrids.
By Carsales Staff
Some of Australia’s most popular family SUVs will become more expensive next year due to changes in the Luxury Car Tax threshold.
The Federal Government recently announced alterations to what it considers to be a ‘fuel-efficient vehicle’, effectively halving the maximum average fuel consumption figure – from the current 7.0L/100km benchmark to 3.5L/100km – from the start of the 2025/2026 financial year.
At present, a 33 percent LCT tariff is applied to every dollar in the transaction price above $76,950 for all vehicles or $89,332 for fuel-efficient vehicles with an average consumption figure at or below the threshold of 7.0L/100km.
The changes were announced by Federal Treasurer Jim Chalmers in December as part of the government’s Mid-Year Economic and Fiscal Outlook, which claimed the revisions were designed to tighten “the definition of a fuel-efficient vehicle” while also further encouraging Australian consumers to consider electric vehicles.
The report claims the changes are expected to increase LCT revenue by $60million in the first year of their application.
The consequence is that dozens of popular family vehicles that are currently exempt from LCT will likely be hit with significant price increases, including high-grade hybrid variants of the Toyota Kluger and Lexus NX and ultra-efficient turbo diesel seven seaters like the new Mazda CX-90.
Unsurprisingly, the automotive industry has slammed the decision, with Federal Chamber of Automotive Industries (FCAI) chief Tony Weber declaring it counterintuitive and again calling for the LCT to be abolished altogether.
“The LCT penalises Australian consumers, as it imposes unnecessary additional taxes on many low emission technology vehicles,” he said.
“The changes announced today in MYEFO slug Australians with more taxes and make vehicles less affordable. The change to indexation is just another cynical revenue grabbing exercise.
“If the Australian government wants to modernise the LCT, they should remove it as part of true tax reform for the transport sector including consideration of a road user charge.”
Australian Automotive Dealer Association (AADA) CEO James Voortman echoed these sentiments and also declared the LCT redundant given the reasons behind its initial establishment.
“These changes to the luxury car tax (LCT) have made a bad tax even worse,” he said.
“The LCT is an outdated tax meant for a time when Australia still manufactured cars – it should have been abolished years ago, but now it’s being used to further tax fuel-efficient cars.
“The Australian government should be encouraging the uptake of fuel-efficient vehicles, not increasing the tax on them.
“The best way the government can use the LCT to achieve a 43 per cent reduction in greenhouse gas emissions by 2030 is by abolishing the tax altogether.”
Disclaimer: Images supplied by Carsales.
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