The motor vehicle industry and Australian consumers have been subject to an unfair and disproportional tax – the Luxury Car Tax (LCT), applied to all vehicles over a certain value. It was introduced in July 2001 as a tax on vehicle sales to support/offset the tax subsidies offered to vehicle manufacturers in Australia. It has been identified in multiple tax and competition reviews to be a Tax that should be repealed. And now that vehicle manufacturing has ceased in Australia, there is no argument for the continued application of the LCT.

Two main arguments for keeping LCT are:

• Repealing LCT would leave a void in tax collections for the Australian Government
• Repealing LCT could create a discrepancy in asset values for vehicles that were purchased with LCT paid vs vehicles not subject to LCT

Our proposal is to phase out LCT by identifying a quality in vehicles that we would like to see adopted to replace the aging fleet of Australian registered motor vehicles. To achieve this we propose the following:

• “LCT rate of 0% applied to ultra-low-emissions vehicles”
• “Definition of ultra-low-emissions vehicles (ULEV): a vehicle which emits 50% less polluting emissions than the average for new cars produced in that model year. ULEVs include Zero emissions vehicles, EVs, hybrid EVs, hydrogen fuel and renewable fuel vehicles”

This proposal overcomes the two main arguments for keeping LCT:

1.  to date not a large amount of ultra-low-emissions vehicles have been sold in Australia at prices above the LCT threshold for prior years, therefore phasing out LCT on ultra-low-emissions vehicles would not have a great impact on asset values
2. the Australian government has not been seen to be adequately promoting the widespread adoption of ultra-low-emissions vehicles, and any reduction in LCT collection through the sale of ULEVs could be seen as measurable benefit to the Australian community and environment.

Finally another reason this phase out of LCT would be of benefit to Australia, is it would remove one barrier to a free trade agreement with the European Union, who have identified LCT as a major sticking point to a free trade agreement that would grant Australian businesses and farmers greater access to European markets.

Now is the best opportunity for the Australian Government to act on phasing out LCT whilst simultaneously encouraging the adoption of cleaner, less polluting vehicles on Australian roads.