Luxury Car Tax - thoughts

[Shane911]

The Luxury Car Tax (LCT) was introduced in the year 2000 at the same time the GST was introduced and its stated purpose was to protect the local car industry.  We are now in 2022 and there is no longer a local car industry but the LCT still exists.  In Australia we have a very old average age of cars on our roads, which means that they are not as fuel efficient or as safe, as if we had newer cars.  Neither side of politics seem willing to abolish the LCT (there was brief talk about it once the last local manufacturer closed their doors, but nothing since).

What are forum members thoughts on abolishing the LCT?  It would make new Porsches (and all other brands) much cheaper, but would also have a flow on effect to the value of our used cars.  Who would be in favour of abolishing this tax (Not that I can do anything about it, but just seeking opinions) (also I would hate to buy a Porsche (new or used) and have the LCT abolished a few months later)

I have set this up as a poll but also interested in hearing members thoughts.

 

Shane

 

[OZ930]

4 minutes ago, Shane911 said:

(also I would hate to buy a Porsche (new or used) and have the LCT abolished a few months later.

...and that was the argument against.

(as well as reduced income for the pollies super scheme)

[LeeM]

 I'm not that smart at all, yet I can only see the government increasing the LCT, as they needed to make up the shortfall with their own f..k up by killing the local car industry, and that will continue with Australia becoming more dependant on imported goods. We can't compete with China and Korea.

 Sorry to be a negative Norm here, but there will be no savings in any tax as long as I'm on the planet. It will only get worse, and that's very plain to see

[flamingporsche]

The only thing that I can see the pollies doing is raising the threshold for what's classed as a "luxury" car.  You can't get away with a decent spec Ford Ranger or Prado or similar without breaching the threshold.  Sure, you can get a Poverty Pack version - but you can hardly call any of these cars a "luxury" item.  It would be interesting to see how much tax is collected across various price brackets - I would hazard a guess to say that the majority comes between 75-100k.  Therefore raising the threshold has such a significant impact on tax revenues that they may as well drop it altogether - I know, I know... wishful thinking.

[MFX]

If they were going to abolish it, now would be the time. With the lack of new car stock and the prices of a lot of used cars exceeding new cost. That said, I think the most sensible way of doing it would be to taper it off. Maybe reducing gradually over 5 or 6 years to avoid shocking the market. 

I am sure the used car market when  they introduced it got a nice bump at the time so a bit of a hit on the new car market would just balance it out? (coming from someone who would never buy a new car ).

[Shane911]

Toyota buyer pay more in LCT than Porsche buyers

Just found this online, published today (I didn’t even see before starting this post)

https://www.drive.com.au/news/renewed-calls-to-abolish-luxury-car-tax-after-it-impacts-more-toyotas-than-porsches/

[Coastr]

It’s a stupid tax - but then most are stupid (ahem, stamp duty).  It serves as class warfare talking points, so it stays.  Australia is severely overtaxed and wastes tax revenue on short - term vote buying.  We are governed by spineless imbeciles who fear the various opinion mobs (all parties) and so look to compromise their way through every decision.  And there is no strategic thinking going on at all, like how to increase national self sufficiency, like maybe perhaps getting back to refining fuels and making metals onshore. Or even on how to build up capital markets so the successful Australian companies that do spring up don’t kick off to the usa for more investment the moment they can.
 

I don’t know why they even bother with a tax policy anymore as the unofficial policy is ‘print money to pay’ - you see lots of dimwits running around in love with MMT as though it’s some type of revolutionary new idea.  It’s not - the basic plan is to ‘keep borrowing  and inflate away the debts’.  Some countries are in unofficial negative interest rates, given a 6-7% official inflation rate so are we technically.  Running a tight ship and building a strong national industry are 20th century ideas, long gone.

So why the government even bothers with niche taxes like LCT anymore is a question for the ages. 

Anyway, hang on to your real assets like rare cars and real estate because the AUD is headed for 50% of its 2020 value within the decade.  And you’ll nostalgically say ‘I remember when you could buy a beer for less than $20’ - or a house - any house - for less than a mill.

I guess that should be in the vent thread!

[Coastr]

Oh, and it’s wrong saying it was introduced in 2000 as part of the GST with Howard.  It came in 1990, introduced by Keating.  The Howard version just replaced the earlier version.  Mercedes brought out the 180E, a stripper model of the 190E with a smaller engine and no luxury features, to keep the price under the $42,910 threshold.  I know because my parents had one.  I remember the LCT covered about 4% or so of vehicle sales - back when a Camry cost you $20k.  But the threshold is now $67k despite most cars costing more than twice what they did in 1990.

If you’re curious (and nostalgic) found this old AFR article online - written in 1990 https://www.afr.com/companies/keating-threatens-the-golden-goose-19900302-kaleb

[Raven]

Yes and while they are at it do away with stamp duty and capital gains tax  .............Grubs

[Joz]

5 hours ago, LeeM said:

 I'm not that smart at all, yet I can only see the government increasing the LCT, as they needed to make up the shortfall with their own f..k up by killing the local car industry, and that will continue with Australia becoming more dependant on imported goods. We can't compete with China and Korea.

 Sorry to be a negative Norm here, but there will be no savings in any tax as long as I'm on the planet. It will only get worse, and that's very plain to see

Guys can we do a go fund me to bump of  @LeeM ?

 

[LeeM]

2 hours ago, Joz said:

Guys can we do a go fund me to bump of  @LeeM ?

 

 As long as the proceeds go to my account, bring it on bitches! 😁

[Shane911]

2 hours ago, Joz said:

Guys can we do a go fund me to bump of  @LeeM ?

 

Lol, thought the same thing when i read his post.:)

[LeeM]

22 minutes ago, Shane911 said:

Lol, thought the same thing when i read his post.:)

 Just a realist mate 😁

[Coastr]

Meanwhile, in off-with-the-pixies academia land this guy was proposing a doubling of the LCT because ‘rich people like buying expensive things, so increasing the price doesn’t stop them buying less’.

https://theconversation.com/amp/luxury-cars-could-be-the-governments-best-friend-54557

these are the types of people who end up forming public policy and writing the bills that pollies vote for.  That’s someone who has lots of economics qualifications and thinks they understand markets.   As if an optioned up Ranger is a ‘luxury’ that your average owner would buy more of if you hiked the price another 30%.

I could maybe think that a luxury car tax might be justifiable from a class warfare policy point of view if, say, planes, boats, horses and art was taxed at the same rate.  There’s no import duty or luxury tax on a 1960s modern art piece costing millions but bring in a Ferrari GTO and that will be 33% on the valuation, thanks very much.  What a ridiculous, indefensible policy. 

[sleazius]

Here's my tax reform policy:

Step 1: Set the tax free threshold to $80k (almost noone under $80k pays any net tax so why bother taxing them at all.)

Step 2: Drop all other income tax to the company rate, flat rate for all.

Step 3: Remove all the GST free loopholes

Step 4: Increase welfare for all the bludgers (and the needy) so they don't starve

Step 5: Remove every other tax at all tiers of government other than council rates

Step 6: Increase GST to whatever % it needs to be to cover all the bullshit they want to waste money on and any of the above changes, including reimbursing the states for payroll tax and stamp duty

Bonus Perk: Fire at least 50k government employees across all tiers as they are no longer needed (this is probably a wild under-estimate).

*******

I did the napkin math on this a while back - GST needs to be in the 35-40% range to make it work. Would never happen but a man can dream.

[Coastr]

The weeping and wailing from the tax extraction and minimisation industries could be heard from Jupiter.  A tax with no loopholes - you could distribute a spreadsheet to calculate it. 

I’m all for your proposal - assuming that’s 50k govt productivity reversers per state, right?

I’d be happy with x forced govt layoffs for every billion they run in deficit.  Every other org has to let people go when they overspend - why is the government special ?  Oh, because some idiot half commie toff invented ‘macro’ and gave them all permission to pretend they’re doing the right thing.

[jakroo]

10 hours ago, Coastr said:

....

I’d be happy with x forced govt layoffs for every billion they run in deficit.  Every other org has to let people go when they overspend - why is the government special ? .....

I think you'll find many of the small businesses, the ones that do the heavy lifting of employment, went in to deficits in recent years, and that's with government assistance. Some let people go but many, including mine, had to borrow to keep going, and of course many many were shut down. Deficits are a facet of life ever since someone lent someone else money to do something.

You've forgotten what the role of government is. They too have forgotten what their role is, so it's even 🤯.

It's essentially to provide governance (to create and oversee policy) and to assist in implementing that policy. This will sometimes cost more than what's coming in via our taxes and other times there is a surplus of funds. Over the fullness of time, it should be equal.

Business objective is to always run in a surplus but of course that doesn't happen all the time either.

As an outsider to something like government or big business, it's easy to observe (often partially) and commentate. A few people decide to try to help fix the issues they have observed and realise the inertia of large operations is such that to overcome is nigh on impossible.

I'm not saying give up, but one can't be self serving in these roles (such as eradicate LCT) or you'll become one of them.

A wholesale change is needed, such as Sleazius's napkin workings, but we humans hate change so it's unlikely we'd ever go for it. A dictator could implement it quite easily but the world doesn't really like them either.

 

[cafe_racer]

I think the problem with this tax, is that the money generated was not directly attributed to protecting local car manufacturing.  It was money that just went into the government pot of "tax collected".  So the odds of them giving up any revenue is slim as the group that it targets is viewed as "wealthy people buying expensive cars".  It's in the name, "luxury".

[sleazius]

Its just another middle class tax. Most business owners lease their cars or use tax effective mortgages as a tax dodge. It was designed to stop the middle class from buying anything other than Holdens and Fords. Can't let the proletariat get any ideas that they are better than they are by driving a euro. Protecting jobs was just a dog whistle. The subsidies and this tax were unrelated to each other.

You'll note that art, yachts, jets, horses, mansions are all not impacted... wonder why?

[dobbo]

We don't have a car industry to protect anymore it should go. The top 3 or 4 oil and gas exporters don't pay any income tax but they do donate to the political parties.

[smit2100]

On 14/03/2022 at 12:44, Coastr said:

Oh, and it’s wrong saying it was introduced in 2000 as part of the GST with Howard.  It came in 1990, introduced by Keating.  The Howard version just replaced the earlier version.  Mercedes brought out the 180E, a stripper model of the 190E with a smaller engine and no luxury features, to keep the price under the $42,910 threshold.  I know because my parents had one.  I remember the LCT covered about 4% or so of vehicle sales - back when a Camry cost you $20k.  But the threshold is now $67k despite most cars costing more than twice what they did in 1990.

If you’re curious (and nostalgic) found this old AFR article online - written in 1990 https://www.afr.com/companies/keating-threatens-the-golden-goose-19900302-kaleb

Couldn't open the link.   But Speaking of golden gooses and killing the pig, what about all these baby boomers who owned successful businesses  back in the day and how good were the  tax deductions.  I'll buy the art works for the foyer to the office, leave it for a week in the office and take it home.  Depreciate it under the business  and then sell it to myself  at written down values from the business.     Yachts and boats are  claimed to the max for the those friday to Sunday  afternoon business meetings  with all food and alcohol claimed. Then  I'll just take the luxury car ( no 190E benz)  from the workplace office and drive it to where the company boat is moored. Park it securely  overnight and do the responible thing  and  claim the taxi home  paid by cash and then claim the taxi the next day to pick the car up for full usage on the weekend before its parked back at the office on Monday morning.   My salary is modest and  just below  the top marginal rate threshold.   Dont own any assets in my name,   why would i want to waste money on personnel assets that I cant claim a deduction on.  Load them up via the business as tax deductions and i'll buy them when its  time when they loose their shine.    Hmmm, the younger gen and pollies on payg come in and say thats f'd up.  We'll tax you  business owners at the top marginal rate under the guise of a Fbt for use of those assets.   But the  mafia  that specialise in tax minimisation get in coohoots with the government and write volumes for new tax legislation that captures most businesses that need to comply.  Another  revenue stream for the mafia to get there grubby hands not only from those taking the piss baby boomer business owners but also the   hardworking non baby boomer business owners paying 6 to  17% plus home  mortgage rates. 

Any one here work for the millionaires factory. Heres the  irony and a linkage to LCT as an average payg punter.  I have 3 -1 major  avenues to mimimise my tax.  -1) Super contributions via  salary sacrificing.    But on a defined benefit super plan basically   screwed. The actuary deems my companies liability as above the threshold  contribution and i have to pay extra tax to salary sacrifice any super  even though my salary includes a nominal amount below the threshold of 25k.  So it costs me to  salary sacrifice super that is not touchable for circa  15 years plus way in excess of 15%.

2) interest on investment loans.  That is capped based on income. 

3) salary sacrifice novated lease  payments on a vehicle.    So first get dinged 20% fbt basically on the vehicle cost.  Also get dinged lct as part of the lease liability if venturing above 67k.  My companies mandated leasing provider deals strictly with Macquarie ( MQB)  finance.   Not withstanding paying PAYG to the ATO  and a australian  resident for tax with a australian primary residence , and wanting a lease on an australian registered car, as your  payslip is in usd and funds deposited in your australian bank account  that needs declaring of any interest  is in usd, you are soooo risky that we deem your income as zero and reject  your lease financing application.

Full disclosure.  Yes I am a MQG shareholder   They also  funded my novated lease on both my 996 turbo  ( got dinged  for LCT) and m3 a few years back.  My application that was rejected was for a second hand below the LCT  for a  audi sq5.  The other thing is that my daily per diem allowance  declared as income on my payslip  in the application paid in Usd  alone would cover the novated lease payments for the year.   MQG  charge a lazy annualised rate of circa  8%pa under the lease.   A mere circa  2.5  multiplier more that the interest  rate i am paying on one of my margin loans and the margin loan amount is about 22 times the value of the vehicle lease amount I applied for  with MQB.   Headscratching.  Perhaps  too much of a tightarse for my own good.  I  should of raised the bar and requested an application to fund  a Macan over the LCT instead of an SQ5.   The thing is with a circa 1k tune on the sq5, would  need a macan turbo or macan  gts  to make a drag a contest interesting,  But could buy circa 2 sq5's for same vintage macans turbo / gts and their  not 4 times better than a sq5 particularly  if you have access a  996 turbo manual.  My ex neighbour traded up into a macan turbo from a sq5 of same vintage.  Biggest downside comparing the pair was filling  the sq5 up once  every 3 weeks vs  the macan turbo up weekly .   That was when petrol / diesel was circa around $ 1.10 a litre for  bp ultimate ( 98 or diesel).  

@ sleazius is all over it.  Bit like  Hong Hong.   But the tax services mafia would would all have a  stroke.   Imagine entering 4 or so non prefilled numbers into your online tax return yourself from your simply kept spreadsheet backup. 

 

 

 

 

 

 

 

 

[Oldknees]

Got to remember that when you are playing the Porsche Configurator every option cost 33% + stamps additional to the $$$ shown on the config. Porsche TAX + Lux tax  &  stamps add up really really quickly.

Any why is every option on a 992 more expensive than other models?

 Not that you can get any allocations anyway!

[edgy]

I would imagine in the car enthusiast domain you're going to get a resounding "abolish it", however I dare say a lot of us are not susceptible to paying it, least not frequently as we enthusiasts typically make the acquisition down stream in the cars lifespan... rightfully so, having done the "new Porsche thing" I am in no hurry to do it again, not because of the experience (it was great) but its financially stupid (to me) and a large part of that is, you guessed it; LCT ... and so we're exposed to the 5% above $60k stamp duty (another BS tax) sure? But it's more palatable than LCT... having said that, LCT is applicable to vintage cars upon import, so enthusiasts who buy used don't always get a free lunch. 

Re: Tax in a general sense, well more specifically business... in my experience, anyone from small to SME are generally getting bent over... I feel a static (and lower) tax rate for all business (like HK) would incentivise more compliance, I'll caveat that by saying that they should go hard on compliance and reporting for the big guys, you know the big boys based in "insert tax haven" and pay no tax within Australia? Any auditor worth their salt can read that play book from a mile away...

[sleazius]

2 hours ago, edgy said:

Re: Tax in a general sense, well more specifically business... in my experience, anyone from small to SME are generally getting bent over... I feel a static (and lower) tax rate for all business (like HK) would incentivise more compliance, I'll caveat that by saying that they should go hard on compliance and reporting for the big guys, you know the big boys based in "insert tax haven" and pay no tax within Australia? Any auditor worth their salt can read that play book from a mile away...

Ban transfer pricing and base tax for known tax dodgers like Google and Apple on revenue. Problem solved.

Every tax issue that politicians (and industry) claims are insurmountable because of x, y and z are so easily fixed it is ridiculous. "I have a vested interest in not fixing this problem because of the 7 figure corporate gig I'm going to be handed when I retire from politics"

I also agree - its not SME and small business making 5-30% margins that are the tax issue, It is the corporations making a mockery of the tax system. Apple with their $11B in revenue and paying $100M in tax in Australia for example. Who would have thought that a phone that has $130 in parts in it but is sold for $2500 would require such huge overheads to get it into the hands of customers. There must be some fantastically wealthy logistics or Apple genius bar employees getting around.

Largest company in the world can only manage 0.9% margin in Australia. Makes sense to me!

 

[Shane911]

22 hours ago, edgy said:

I would imagine in the car enthusiast domain you're going to get a resounding "abolish it", however I dare say a lot of us are not susceptible to paying it, least not frequently as we enthusiasts typically make the acquisition down stream in the cars lifespan... 

While we might not directly pay the LCT, we are still heavily affected by it as it has a significant impact on the price of used cars, eg if the LCT was abolished, the price of a brand new $400k Porsche would fall by ~$108k or 27%, this would flow through to the used car market as well, as no one is going to pay more for a used than they would for a brand new car.