Will Luxury Car Tax begin to be dismantled from 2019/2020?

[Ian718]

Apologies if this is an already known discussion topic. But a quick forum search only found a brief off the cuff mention of LCT's potential removal:

 

There are many similar articles which probably all come from the same source. Here is one:

https://www.carsguide.com.au/car-news/mercedes-predicts-luxury-car-tax-gone-by-2020-60367

Here is my (potentially flawed) summary: The LCT was introduced to protect the domestic car industry. That doesn't exist anymore, so the tax's main purpose is gone. So logically the tax should be removed. However the Australian government won't just remove the tax due to the huge income it provides the budget/government.

Enter the Free Trade Agreement with the European Union. The EU's position is that the LCT is bullsh*t (except they use the term false tariff). The EU would sell more European cars to Aussies if the cars cost less because LCT didn't exist. More cars sold = more money to the EU car companies. Therefore EU wants the LCT gone.

If the total financial benefit of the EU Free Trade Agreement to the Australia/government outweighs its losses (including loss of income from LCT) then this is likely to go ahead. Both major political parties seem to be all for the EU FTA, and it is likely to come into effect by 2019.

Speculation is that instead of just dropping from 33% to 0% it will be gradually decreased every year - ie 22%, 11%, 0%

So potentially 2019/20 = 22% LCT

2020/21 = 11% LCT

2021/22 = 0%

If the above is true, then the effect of this is 'WOOHOO!' to those of us who like to buy new Porsches

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So is this something that everybody already knows, and I only just stumbled upon it last night?

[porky]

Government is unlikely to withdraw a tax once in play. The LCT really should go for all the reasons you mentioned but who really cares about a few people who like to drive ‘luxury cars’. It’s not like they’re sticking an extra tax on a common item like an iPhone.


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[Ian718]

I agree that the government is unlikely to withdraw a tax once in play, *unless* there is a good reason.

And the EU forcing the issue by not signing the Free Trade Agreement unless LCT is abolished would count as a good reason to me.

But perhaps you are right. Maybe I am being optimistic, just because I want this to be true.

[DJM]

Bill Shorten would jump at the chance to hammer the Libs if this was so much as suggested.  Just like reducing corporate tax for "big business".  He'll bang on about middle Australia and working families who buy sensible camrys and Commodores paying for Turnbull's mates at the top end of town buying new Maseratis.  Makes sense to piss it off but it will stay for domestic politic reasons.

I assume it would also impact used car market. A $400k GT3 becomes low 3s without LCT so instant depreciation.

The Greens all drive 70s Volvo wagons so they won't be up for it.  And Hanson probably drives an HQ wagon to lug her dimsims to the F&C shop.

 

[Damienb]

I think the posts above have got it spot on.  Economically and logically, the tax should be gone.  But Labor won't do it as they'll be seen as hypocrites and there is nothing in it for their supporter base. The government won't do it as they're addicted to the revenue and it won't pull any new voters. Sad but true.  (By the way, where is Ricky Muir?)

[sleazius]

I'd be shocked if it happens. How many lucrative taxes have been removed in your lifetime? Cause in mine it has been very few. A heap of small taxes have been removed, but nothing that collects serious revenue.

[Ian718]

31 minutes ago, sleazius said:

I'd be shocked if it happens. How many lucrative taxes have been removed in your lifetime?

Fair point. You've got me there.

 

33 minutes ago, Damienb said:

I think the posts above have got it spot on.  Economically and logically, the tax should be gone.  But Labor won't do it as they'll be seen as hypocrites and there is nothing in it for their supporter base.

In terms of benefitting Labor's supporter base, the tariffs in the EU against Australian exports (agriculture, coal, minerals etc) would be removed thus benefitting the industries/workers that traditionally are Labour supporters.

 

52 minutes ago, DJM said:

Bill Shorten would jump at the chance to hammer the Libs if this was so much as suggested.  Just like reducing corporate tax for "big business".  He'll bang on about middle Australia and working families who buy sensible camrys and Commodores paying for Turnbull's mates at the top end of town buying new Maseratis.  Makes sense to piss it off but it will stay for domestic politic reasons.

I assume it would also impact used car market. A $400k GT3 becomes low 3s without LCT so instant depreciation.

The Greens all drive 70s Volvo wagons so they won't be up for it.  And Hanson probably drives an HQ wagon to lug her dimsims to the F&C shop.

Being a Porsche forum, of course cars and the LCT are front and centre in our minds. But I am hoping that the LCT removal will be a side effect of the EU FTA rather than the main attraction.

The FTA also causes the EU to remove its tariffs against our exports (agriculture, coal, minerals, etc). In return Australia removes its tariffs against the EU imports (cars, medications, pharmaceutical products, etc). It benefits our Agriculture and Mining industries, so it will be good in winning the popular vote of a large number of Aussies. Thus I am hoping both Labour and Liberal wish to support the idea.

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BTW I am by no means competent in the fields of economics or politics. I am just desperately clutching at straws.

[Carrera28]

Unintended consequence would be that if they dropped LCT in one hit, the second hand value of current cars could potentially drop as well

[sleazius]

1 hour ago, Carrera28 said:

Unintended consequence would be that if they dropped LCT in one hit, the second hand value of current cars could potentially drop as well

Good. I just pissed away $70k in luxury car tax, make them cheaper and more will be ordered driving the market down further. This is a great thing for enthusiasts.

[LeeM]

Politicians removing a tax? ??? More chance of the sun extinguishing itself before that happens

[Raven]

TAX REMOVAL .... The politicians are too busy enjoying all the perks at the tax payer expense ,, having sex with staffers and living it up to even think about looking at any tax cuts or for that matter doing any thing beneficial for the nation   .............As I have said before they are disorganized crime 

[Troubleshooter]

^^^  ^^^ What they said!

[9r]

Logically it should go but when ever has logic been a part of a politicians decision especially when it earns so much revenue for them and DJM got it spot on. For all the reasons above it won’t disappear anytime soon

[edgy]

Our Robin Hood government won’t drop it, and if they were dead set on protecting local car industry we’d of had a blanket tariff on ALL imported cars regardless of their value, just like Thailand does... 

 

[Stephen Tinker]

Just to add insult to injury, Wheels magazine (January page 16) reported that the Australian Government estimate of the next 4 years' Luxury Car Tax income (a fiscal measure originally introduced to protect Australian manufacturing) =

$A2.9 BILLION

No way in a million years will they remove that influx of money.....

 

[TwoHeadsTas]

Friend is looking to get into a 246 Dino.  LCT is definitely the difference in price between UK / Europe and here.  He's sweating on it going, but I also reckon it's here to stay for a while....

[Coastr]

On 17 February 2018 at 1:24 AM, Ian718 said:

In terms of benefitting Labor's supporter base, the tariffs in the EU against Australian exports (agriculture, coal, minerals etc) would be removed thus benefitting the industries/workers that traditionally are Labour supporters.

Are you sure this is labors base?  Seems to me every person I know who works in primary industry left that tent long ago.  Do landcruisers get hit with LCT?   The biggest noisiest part of labours base these days is quasi professionals who rely on government spending to get rich.  Think nurses, public sector people and the attached consultant class.  Every change in government to labor recently has traditionally resulted in closure of industry and primary industry and expansion in public sector size.  Especially true for the East Coast anyway.  Not making judgement, just observing.  Ditto for greens voters who are traditionally either students without their own income or the more radical professional class.

when it was introduce both BMW and Mercedes produced modelling showing the drop in sales would mean the extra tax would not make up for the loss in ordinary sales tax.  But that was long ago so bracket creep and an increasingly richer Australia probably made up for it.  $2.1 bill is a lot of pork to throw at electorates.

The EU insisting on free trade is a bit of a larf, they are the most protected trading bloc around.  It's free trade within their group and FU to everyone outside.  Ask the Japanese how many cars they sell into the EU.

If the liberals really wanted it gone it would have gone under Howard many years ago, or been proposed when abbot was there.  They make mewling noises about it, but never do anything serious.  It's just a dog and pony show to keep the voters on board, dangling the carrot that this time, they really really will get rid of the tax.

i wouldn't bank on it going anytime soon.   If you happen to talk to a politician, ask why an entry level $60k European car is a luxury but a 2 mil yacht or 1mil holiday apartment is not.  

What everyone on this forum can do is make sure whenever someone tried to hang crap on you for having a nice car is to push back on it.  Comments like 'yeah cause a $50k kitchen/boat/horse/cruise/whatever is totally different'.  We have to individually work to end the persecution of cars as somehow inherently wasteful and unworthy.  Politicians follow the crowd.  Don't feel and act guilty for having a passion and interest.

 

[symsy]

A debt driven investment in real estate boom will more than cover most peoples lifetime LCT bills , or offset it again by investing in a tax free commodity CARS .. did I say that word loud enough.    Buy a classic AC car.

Im hoping they raise speed limits,  get rid of speed cameras and reduce taxes in petrol .. that would make a massive effect to my everyday motoring costs and damn make me smile

Failing that get radical get bitcoined conned or something , its a bit like LCT on many levels , no one knows where your dollars go when you cash em in , there is in addition the illusion the money you put in is somehow incorporated into the value of the thing you bought.

I always thought LCT had something to do with a promise , a promise of a Luxury Car Track .. I was told that and the skatepark were coming soon to a an area I live in  

When I was younger I dreamed of skateparks instead of general pavements , I now regularly dream of motorsport park instead of a bypass or traffic calming 

[firstone]

Motivate the dealers to push for it's removal through a refusal to buy them.

How long do you think you would have to hold out?

[LeeM]

1 hour ago, Coastr said:

 

What everyone on this forum can do is make sure whenever someone tried to hang crap on you for having a nice car is to push back on it.  Comments like 'yeah cause a $50k kitchen/boat/horse/cruise/whatever is totally different'

 

  I rolled up to the new mob I contract to in my 911 for the end of year drinks, and a couple of the bosses and employees said I was being paid too much to own a Porsche. I basically replied with '36 years of working various jobs, doing overtime or working 2 jobs, doing cash jobs for the last 10 years, past 5 years doing 5 days a week in normal job and a musician on the weekends, rarely have days off, don't have kids, have no credit cards or loans (except mortgage) and got lucky before the Porsche bubble, I think I'm entitled to own one!' 

  They own old Monaros and/or new Range Rovers, and are in debt up to their eyeballs, go on overseas holidays, married with kids and single income, claim everything theyre probably not entitled to at tax time, and probably have more in the bank than I do (not hard to do that), but thats ok! 

 Fortunatley, the LCT will never affect me directly, as I could never afford to buy a new car (wouldn't anyway, as I hate depreciation), and I bet any politician wangles their way out of the LCT when they buy an expensive car! No matter what your financial position is, you will always be the government's puppet when it comes to paying tax.....unless you're a politician ofcourse!  

[sleazius]

Whenever someone attempts to give me shit (this is about the yellow one, not the black one) I just point at their SUV and tell them their family car cost more... 95% of the time it did. Shuts them up real fast.

[Ozvino]

9 minutes ago, sleazius said:

Whenever someone attempts to give me shit (this is about the yellow one, not the black one) I just point at their SUV and tell them their family car cost more... 95% of the time it did. Shuts them up real fast.

That could be a problem with the GT3 unless you have friends driving a Bentayga 

[sleazius]

3 minutes ago, Ozvino said:

That could be a problem with the GT3 unless you have friends driving a Bentayga 

Yeah that argument goes out the window with the black one, but I managed to keep a previous car a secret for 5 years so this will be fine - one of the perks of living on acreage (and owning 6 cars).

[Coastr]

3 hours ago, firstone said:

Motivate the dealers to push for it's removal through a refusal to buy them.

How long do you think you would have to hold out?

My impression is the dealers don’t care.  They threw an absolute hissy fit over parallel imports but say nothing about LCT.  If anything I think it allows them to justify the outrageous prices caused by parallel import restriction by blaming the LCT.

Maybe they really do care but you never hear them lobbying for change.  Maybe keeping quiet on the LCT is the price of stopping personal imports.

[sleazius]

Further to this, the majority of buyers of expensive cars aren't enthusiasts. So how would you stop them? The lease is up, time to lease something else. How much it costs is irrelevant to this type of buyer, the only thing that matters is 'can I afford this lease payment?'.