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Scrapping Australia’s controversial Luxurious Automotive Tax (LCT) continues to be on the desk as a part of negotiations for a free-trade (FTA) settlement with the European Union, which is predicted to convey decrease costs for European-made fashions.
The federal authorities expects the LCT to value Australian new-car consumers $1.21 billion within the 2025-26 monetary 12 months (July 1, 2025, to June 30, 2026) – however it could be scrapped as a part of the negotiations.
Prime Minister Anthony Albanese, talking finally week’s G20 world leaders’ summit in Johannesburg, South Africa, mentioned he hoped to have the FTA finalised within the first quarter of 2026.
When Mr Albanese was requested by media on the occasion if the earlier proposal to scrap the LCT on European automobiles was nonetheless a part of the negotiations, the Prime Minister remained coy on the small print.
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“I believe we’ve been fairly profitable at not ruling issues in or out at press conferences, however partaking in a respectful manner with our companions,” he mentioned, as reported on the ABC.
“I believe that free and truthful commerce may be very a lot in Australia’s nationwide pursuits.”
Earlier reviews have advised the dumping of LCT hinges on the deal on agricultural exports to the EU, which has been pushing for the LCT’s removing as a part of the negotiations since 2018.
In response to The Australian, round 40 per cent of the income from LCT comes from gross sales of European automobiles.
The LCT was launched within the mid-2000s – changing wholesale tax on luxurious automobiles – below the John Howard-led federal authorities and was supposed to guard Australian automobile manufacturing trade.
Car manufacturing led to Australia when Holden and Toyota stopped making automobiles regionally in 2017, after Ford closed its remaining factories at Geelong and Broadmeadows a 12 months earlier in October 2016.
A evaluation of Australia’s tax system in 2010 advised the LCT could possibly be “thought to be discriminatory as it’s the solely Australian authorities tax that applies to the sale of products or providers designated as luxurious”.
‘Luxurious automobiles’ have been topic to extra taxation in Australia since 1979 – when solely two Australian-made fashions, the Holden Statesman and Ford LTD – had been priced above the $18,000 threshold.
After its introduction in 2000, the LCT price has been reindexed yearly and presently applies to automobiles costing $80,567 or extra, or $91,387 for ‘fuel-efficient automobiles’.
Gasoline-efficient automobiles are outlined as having an official mixed gas consumption determine of three.5L/100km or much less.
Patrons of automobiles topic to LCT pay 33 per cent per greenback on the quantity above the brink – along with stamp responsibility, registration and different state/territory-based statutory on-road prices.
The Federal Chamber of Automotive Industries (FCAI) has criticised the LCT as being outdated since Australian automobile manufacturing ended, saying it applies unfairly to a disproportionate variety of automobiles, together with for instance all Toyota LandCruiser 300 Collection variants.
In a 2023 name for the LCT’s removing, the FCAI mentioned in a press release: “It needs to be scrapped. It’s now only a handbrake on the trade bringing the perfect gas effectivity and security applied sciences to Australian shoppers.”
A January 2025 submission on tax adjustments by The Australia Institute pointed to the LCT as an element within the improve in reputation of dual-cab utes such because the Toyota HiLux and Ford Ranger – with the 2 fashions topping gross sales charts since 2015.
“Whereas utes are vital for a spread of occupations, their proliferation, significantly of bigger, heavier fashions, damages the surroundings, damages roads, and incurs a spread of different prices on society,” Greg Jericho, chief economist for The Australia Institute, mentioned within the report.
“Each dual-cab ute available on the market in 2024 was exempt from Luxurious Automotive Tax, with no requirement for the proprietor to display that the automobile was being bought or used for primarily business slightly than private use.”
Advantages of the FTA for the EU embody cheaper entry to Australia’s uncommon earth minerals, which have a heightened significance after provide chain vulnerabilities with China pressured manufacturing stoppages at Volkswagen factories in Europe final month.
Amongst main car-building nations, Australia presently has an FTA with Japan, Thailand, China and Korea, with work on an India-Australia FTA additionally underway.
In response to a federal authorities paper, any FTA with the EU could be designed to “drive Australian exports, financial development and job creation”.
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