The Australian Automotive Dealer Association (AADA) has welcomed elements of the newly announced Free Trade Agreement (FTA) between Australia and the European Union (EU), but says the deal stops short of delivering meaningful reform to the Luxury Car Tax (LCT).
The agreement includes changes impacting Australia’s franchised new car dealers, including the removal of the 5 per cent Passenger Vehicle Tariff (PVT) on vehicles imported from the EU and the introduction of a new LCT category for zero emission vehicles with a threshold of $120,000.
“The removal of the 5 per cent tariff on EU-sourced vehicles will improve affordability and increase competition in the Australian market,” said AADA CEO James Voortman.
However, Mr Voortman said the Government had missed an opportunity to undertake broader and more impactful reform of the LCT.
“While the introduction of a higher LCT threshold for electric vehicles provides some benefit, it is a narrow change that will only affect less than 1 per cent of vehicles sold and does not address the fundamental flaws of the tax,” he said.
“The LCT is a legacy policy from a time when Australia had a domestic manufacturing industry. Today, it acts as a distortionary tax that no longer reflects the realities of the modern automotive market.”
“This was a clear opportunity for the Government to implement meaningful reform by either abolishing the tax entirely or ensuring it only applies to genuinely luxury vehicles,” Mr Voortman said.
“Instead, we’ve seen a partial measure that leaves many everyday vehicles, including those commonly used by small businesses and regular Australians, still captured by the tax.”
The AADA reaffirmed its commitment to continued engagement with Government on comprehensive LCT reform.
“We will continue to advocate for a fairer system, one that targets true luxury vehicles, removes the taxes on genuine parts, and provides clarity and certainty for dealers and consumers,” Mr Voortman said.