1st November, 2018 · Taxation Policy

Passenger Vehicle Tariff

AADA Position

The end of local vehicle manufacturing in Australia presents an opportunity to re-evaluate the way passenger vehicles are taxed. The AADA believes that removing the passenger vehicle tariff can lead to significant reductions for consumers purchasing new cars.

Background

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, India, South Africa and elsewhere still incur the tariff. Passenger vehicle tariff revenue was $540 million in 2016-17.

Almost 1.2 million cars were sold in Australia in 2017 with approximately 24 per cent sourced from non-FTA countries including the European Union, India and South Africa.

The end of motor vehicle manufacturing in Australia in 2017 and the global trend towards electric and autonomous vehicles presents the Government with a golden opportunity to revaluate the taxes and charges on the purchase of a motor vehicle, including State-based Stamp Duty.

While the removal of stamp duty will require the co-operation of the States and Territories, the removal of the passenger vehicle tariff on 290,000 vehicles could open up trade and investment opportunities with non-FTA countries and lead to significant benefits for consumers.

Australia’s FTAs policy creates the opportunity to eliminate tariffs and foster trade and investment opportunities with our trading partners. Currently, around 76 per cent of new passenger vehicle imports are sourced from countries with which Australia has an FTA.

Australian passenger vehicle tariffs were reduced from 10 per to 5 per cent on 1 January 2010 and cars imported from a country with which Australia has a FTA are landed without being subject to any tariff. Australians have benefited and there are 67 brands and over 350 models available to a consumer in what is arguably the most competitive market in the world. Australia has 10 FTAs in force and with the end of motor vehicle manufacturing in Australia there is no justification to impose a tariff on a vehicle sourced from a non-FTA country.