David Blackhall

VICTORIA has become the second Australian state in less than a year to introduce an extra tax on new and used luxury vehicles.

The state has increased the stamp duty on what it describes as luxury in a two-tier program. It now joins Queensland in boosting revenue through vehicle duties and leapfrogs aborted attempts early this year by NSW to bring in a similar increase.

Effective from July 1 this year, the duty for used passenger vehicles valued above the luxury threshold in Victoria will be charged $10.40 per $200 of market value.

This makes used-car duty the same as Victoria’s existing new-car duty and is explained by the government as to “ensure consistent treatment of new and used cars regardless of value”.

Also from July 1, the Victorian government will apply two new “super-luxury” tax thresholds.

Tim Pallas

It will affect all passenger motor vehicles valued between $100,001 and $150,000 and charge a duty of $14 per $200 of market value ($7000). All passenger motor vehicles valued above $150,001 will be charged a duty of $18 per $200 of market value ($9000).

Victorian Automobile Chamber of Commerce (VACC) CEO Geoff Gwilym said that while his organisation supports the state government’s “big-picture thinking around tax issues”, the chamber believes that raising vehicle duty is an unfortunate outcome for Victorian motorists and dealers in what is currently a distressed market.

“With the housing downturn strangling government revenue, something was always on the cards. We accept that,” he said.

“But we note that this is yet again a further impost on motorists and industry, which is unfortunate.”

The managing director of one of Victoria’s most prestigious car retailing groups, Zagame Group’s Bobby Zagame, told GoAutoNews Premium that he is “shocked at the government’s view on the prestige car industry, let alone the industry in general”.

Geoff Gwilym

“We are still waiting on the detail of exactly how it will affect us and our customers, but it will!” he said.

“It surprises me at a time where our state road toll is 50 per cent up on last year and they, the government, are trying to encourage the public to buy new, safer cars that help avoid accidents. Maybe the wealthier person’s life is not as important!”

Australian Automotive Dealer Association (AADA) CEO David Blackhall said: “The increase duty for vehicles over $100,000 is incredibly concerning for an industry which is currently doing it tough.

“The new-car retail industry in Victoria has contracted by more than 10 per cent year to date, the most of any state in the country. Now is not the time for a tax grab, with people’s businesses and jobs at stake.

“Victorian new-car dealers employ almost 14,000 people, provide millions in community donations and make a significant contribution to the state’s tax base.

“Victorian motorists have experienced significant hikes in duties under this government and have made a strong contribution to the state’s coffers by paying rego and duties, while also shelling out GST, tolls and fuel taxes. At some stage you have to say enough is enough.”

Mr Blackhall said the Victorian government has presented the duty increase as a tax on luxury vehicles which will fall on wealthy individuals.

“But it is well known that these vehicles are often purchased by businesses,” he said.

“This will simply constrain economic activity. Furthermore, this tax will discourage people from buying some of the safest vehicles available in Australia.

“This is not a good outcome for a jurisdiction which, according to the Australian Automobile Association, is struggling to meet targets under the National Road Safety Strategy.”

Mr Blackhall said the proposal is claimed to target buyers of luxury cars such as those driving Maseratis.

“Let’s be very clear, at that price point this tax will fall on a top-selling vehicle such as the Toyota LandCruiser,” he said.

“This is a car which motorists in regional and rural areas would describe as a necessity rather than a luxury.

“It will also make most of the electric vehicles available in Australia significantly more expensive, which makes a mockery of any attempts to promote the uptake of electric vehicles.”

Toyota LandCruiser 200

Australia already has a luxury car tax applied by the federal government.

The AADA, VACC and the Federal Chamber of Automotive Industries (FCAI) have this been outspoken about this additional tax that they claim only adds to the cost of vehicles with advanced safety and fuel efficiency features.

“This is, of course, a tax on a tax on a tax – triple taxation, since stamp duty compounds on both GST and the federal luxury car tax,” Mr Blackhall said.

“It’s a bad tax, a poor policy choice and will hurt the new car retail industry.”

Mr Blackhall told GoAutoNews Premium: “The most concerning part of his luxury stamp duty ‘smash and grab raid’ is the often-overlooked inclusion of used cars in the tax net.

“We’re pushing hard on this. Bad tax, bad policy, bad for business, bad for apprenticeships and employment.”

Victoria’s move is not without precedent. In June 2018, the Queensland budget outlined a 10 per cent tax on new and used vehicles valued at more than $100,000.

The new “premium motor vehicle duty” came into effect from July 1, adding an extra $2 per $100 of dutiable value.

In addition, the NSW Labor party earlier this year headed into the state election with a proposal to increase taxes on vehicles valued at more than $100,000.

It said that, if elected, it would more than double the stamp duty to seven per cent in $100 on cars costing more than $100,000 and nine per cent in $100 on cars costing $150,000.

The Labor party did not win the NSW state election.

At the time, FCAI chief executive Tony Weber said the luxury car tax (LCT) was reported by taxation expert Dr Ken Henry as having no economic benefit.

“The fact that states and territories are now considering and implementing this tax is beyond rational belief,” Mr Weber said.

“It comes from a bygone era when the government tried to protect the local car manufacturing industry.

“It’s a tax on technology and interferes with advances in safety and emissions. The only good it does is increase revenue for government and it should be removed and the tax spread across other sectors of the economy.”

Footnote: Victorian treasurer Tim Pallas had a “Chris Bowen moment” while outlining the Victorian budget at a post-budget event at the Melbourne Press Club. Mr Bowen, as shadow treasurer, said during Labor’s failed recent election campaign that if people did not like Labor’s policies they should vote for another party. They did.

Now Tim Pallas has demonstrated similar hubris at the press club event in which Seven reporter Brendan Donohoe asked Mr Pallas what he would say to someone who had “saved up for 20 years to buy a LandCruiser”.

Mr Pallas said: “They’ve been saving up for 20 years for this? Get a life, I’d tell them.”

The difference is that the Labor Party in Victoria has just been re-elected for four years with an increased majority. – JOHN MELLOR

By Neil Dowling and John Mellor