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 will come increasingly under threat as the Australian vehicle fleet includes a growing proportion of electric and automated passenger vehicle systems.
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 an 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. Similarly, with the import duty on passenger vehicles, which brings in some $540 mil per year and is levied largely on imports from the European Union.
Perhaps the biggest threat to the Automotive Taxation System over the medium term comes from the emergence of fuel-efficient vehicles. Battery or fuel cell electric vehicles (EVs) do not even use oil-based fuels so as their popularity goes up, fuel excise revenue will go down. Such vehicles still use the road infrastructure but will not pay to sustain it. This suggests that an alternative to the fuel excise needs to be implemented before the revenue that maintains the road infrastructure starts drying up.