Luxury Car Tax To Be Abolished?

Yes, really! A new trading deal with the United Kingdom could finally see it dropped, but is it too soon to break out the party poppers?

- Kathryn Fisk

TWENTY YEARS after it was first introduced, signs are starting to appear that the Luxury Car Tax (LCT) is reaching the end of the road.

As part of trade negotiations with the UK post-Brexit for both nations to phase out taxes on imports, it’s thought Australia’s whopping 33 percent tax levied on cars over a certain cost threshold could steadily disappear over the next 15 years.

In recent weeks, the UK has put an offer on the table to Australia’s Minister for Trade, Tourism and Investment, Dan Tehan, with an outcome of Free Trade Agreement (FTA) discussions expected by the end of June.

While the Department of Foreign Affairs and Trade (DFAT) remains tight-lipped, insisting trade talks are strictly under wraps, it did not rule out that changes to the LCT would be possible in the near future.

A DFAT spokesman told Wheels: “Domestic taxation measures such as the Luxury Car Tax are generally outside of the scope of FTAs.

“The Government has been consistent throughout this process that it doesn’t comment on the details of the negotiations.”

But given cars are one of Australia’s main imports from the UK, alongside medicines and alcohol, to the tune of $36.7 billion in 2019/20, critics of the tax claim now is the time for it to be axed.

Since Holden ceased production in 2017 as the last manufacturer to build cars on Australian soil, there have been growing calls from industry bodies to axe the LCT as it was designed to protect a local industry which no longer exists.