New car buyers in Australia pay too much tax as they are subject to legacy taxes such as the Luxury Car Tax (LCT), Customs Duty and punitive state stamp duties.
The Automotive Taxation System spans from the federal LCT to state-based stamp duties. In Queensland and Victoria this includes higher, punitive rates for vehicles above a luxury-level threshold. Additionally, import duties apply to cars from countries with which Australia does not have a Free Trade Agreement (FTA). Excise is applied to the fuel cars use, and administrative charges are levied to cover licensing and registration.
The LCT was introduced in 2000 to ensure that luxury cars did not become relatively cheaper when the Wholesale Tax was discontinued with the arrival of the GST. This tax raises some $600 million per year and falls on vehicles which have advanced safety and environmental features. It mainly effects vehicles such as the Toyota Landcruiser which could hardly be described as a luxury car. A range of inquiries and taxation reviews have recommended its abolition.
Concerningly, a number of state governments have started to levy luxury stamp duties. Victoria and Queensland have both implemented such taxes in recent years, meaning motorists in those states are subject to some of the highest rates of vehicle taxation.
The passenger vehicle tariff is a 5 per cent duty on vehicles entering Australia from non- Free Trade Agreement (FTA) countries. While Australia has concluded FTAs with major source countries such as Thailand, Japan, Korea and the USA, hundreds of thousands of vehicles from the European Union, South Africa and elsewhere still incur the tariff, which sees consumers pay some $300 million per year.