The ‘super luxury car tax’ stamp duty charged by Victorian and Queensland state governments is on notice after a successful $2.9 million win in the High Court by a vehicle rental company.

New Zealand-based Tourism Holdings Ltd (THL) – operator of rental businesses including Britz and Maui – this week won a legal challenge against the Victoria State Revenue Office (SRO) that in December 2019 imposed stamp duty assessment notices totalling $2.9 million on new motor homes and 4WD vehicles owned by THL.

The SRO argued that THL should pay for the modified value of its vehicles that were converted to become mobile homes and 4WDs for tourists.

THL said it was a “duty of excise” which rested constitutionally with the federal government and was not a charge able to be imposed by a state government.

The SRO and Victorian government has settled the case with THL; however, the issue remains open for challenge by other groups who argue against being charged the additional stamp duty.

A legal adviser told GoAutoNews Premium that without settling the case could have continued and leave the Victorian government with no basis to continue to charge the extra stamp duty and, further, mean a potentially multimillion-dollar refund for people who had already paid the duty.

The application of the stamp duty applied on vehicles valued at $100,000 and more remains open to challenge from other businesses and even OEMs.

Legal advice received by GoAutoNews Premium said the win by THL – through its Australian subsidiary Tourism Holdings Australia – sets a precedent and challenges the validity of the additional stamp duty charges on motor vehicles levied in Victoria and Queensland.

A lawyer said any business affected by the ‘super luxury car tax’ can take the issue to a court and challenge its validity.

The win by THL also opens the doors to the Victorian Automobile Chamber of Commerce (VACC) which in December had protested to the Victorian government that the extra tax on a vehicle would further dent dealer profits.

The VACC also said that a new tax imposed on new cars at a dealership will push consumers to save money by buying accessories at aftermarket outlets.

In December, GoAutoNews Premium reported that a VACC submission to the SRO’s ‘Review of SRO Revenue Ruling DA.022’ highlighted concerns over the determination of a vehicle’s dutiable value and the issue of accessories or aftermarket fittings being subject to motor vehicle duty.

DA.022 was released in 2003 and superseded SRO Revenue Ruling SD.004 that was released in 1993.

VACC CEO Geoff Gwilym said: “It’s disappointing that our comments on the SRO Ruling DA.022 were not considered by the SRO.”

The VACC said the calculation of the duty needs to be revised because every vehicle is different, and the inclusion of accessories to a new vehicle could mean consumers would bypass the dealer and go directly to an aftermarket supplier and escape the added tax.

It said the SRO’s determination of a vehicle’s dutiable value remained “a major issue” for dealers.

“The VADA (Victorian Automotive Dealers Association) does not believe that the market value of a vehicle should be determined by a private aggregator or that accessories and aftermarket fitting to a new car should incur motor vehicle duty,” the chamber said.

“It is VACC’s view that the market price is determined by elements that these data aggregators do not and cannot factor in.”

The chamber said these elements included supply and demand for specific vehicles and models, odometer reading, vehicle condition, colour and location of the vehicle.

“Accessories added to the vehicle at the point of the sale attract duty as they become part of the dutiable value of the vehicle,” Mr Gwilym said.

“These aftermarket accessories can include the fitment of sunroofs, bullbars, tinted windows and other items.”

Mr Gwilym said the situation could encourage consumers to go directly to aftermarket suppliers to avoid the added tax, which impacts directly on the new-vehicle dealers.

“The impact of this impost results in the loss of revenue to dealerships as consumers often bypass the dealerships in favour of independent aftermarket sellers that do not attract a duty on these aftermarket products,” he said.

“This is at the very core of the (then current) Federal Court proceedings between Tourism Holdings Limited and the SRO. It is a case that VACC and its legal team is monitoring closely.

“In an environment of low margin, this profit centre at dealerships is heavily relied upon.”

According to the VACC, the duty on the accessories is a “discriminatory imposition of duty on these fittings and favouritism provided to aftermarket providers”.

“That would never have been the original intention of SRO Ruling DA.022,” Mr Gwilym said.

“VACC believes the discriminatory nature of the application of duty on one party that directly provides a market advantage to another party, shakes the very core of free market opportunities and provides scope for the attention of ACCC under anti-competition laws.

“VACC members believe that substantial lessening of competition exists in this environment.”

The chamber said that in October 2018, the Australian Automotive Aftermarket Association advised that “the local parts and aftermarket industry is generally in good health”.

“Whilst VACC applauds the healthy state of those aftermarket providers, many participants within the new-car franchise system are not enjoying the same health status as they cannot compete for a slice of that market on equal terms,” Mr Gwilym said.

“The original SD.004 and DA.022 were written at a time when aftermarket providers were few and far between.

“The aftermarket now comprises monoliths such as GPC Corporation who have a recorded turnover of over $16 billion in 2017 and ARB Corporation who had sales of $443.9 million in 2019 – a five per cent increase from 2018.

“VACC cannot sit by and see business lost to aftermarket suppliers that dealers cannot compete with as a result of discriminatory regulation … that is unfairly impacting competition between franchise dealers and aftermarket suppliers.

“The disadvantage to franchise dealers is perverse and unjust.

“It is VACC’s view that the identification of this issue has created the perfect storm and for the opportunity for further duty reform and efficiency gain and will test the resolve of premier Andrews to ensure that Victoria has a fairer tax system.

“It is not difficult to understand how the modern dealership has become disadvantaged from a set of criteria that was developed 26 years ago.

“The serious impact of these duties, and of concern to VACC, is the effect on regional dealers and consequently regional communities.

“Regional dealerships engage heavily with their local community through sponsorships of sporting clubs, charities and not-for-profit associations.

“The loss of revenue due to the tax impost will significantly impact their ability to support such activities within their local communities and subsequently the wellbeing of the community overall.

“VACC recommends and calls for the exemption of duty application to the fitment of accessories and/or aftermarket parts from being calculated into a vehicle’s dutiable value,” Mr Gwilym said.

“The dubitable value should be based on recommended retail price or the negotiated retail price of a vehicle.”

By Neil Dowling