From 1 July 2015 the luxury car tax (LCT) threshold has increased from $61,884 to $63,184 ($1,300 or 2.1%) while vehicles that are considered fuel efficient (better than 7L/100km) have their threshold unchanged at $75,375.

Originally setup to protect Australian automotive manufacturing by making imported luxury brands more expensive (although it also applied to Australian made luxury vehicles such as the Holden Caprice) drivers of luxury vehicles would be taxed 33% above the LCT threshold.  With the demise of Australian automotive manufacturing, renewed calls have been made to abolish the LCT altogether, so July 1’s small increase in the threshold is a step in that direction, albeit a small one. Many in the industry see LCT as a ‘biased and prejudicial’ tax as it does not apply to other luxury items such as yachts and Jewellery.

A select few manufacturers, such as Audi and BMW, have moved to reduce their recommended retail (RRP) prices slightly to pass on the full amount of the LCT concession. However Mercedes-Benz has not opted to alter their pricing on the basis that RRP is “an indicative price, the maximum you will pay”; so even with this change, drivers can still see the biggest reduction in LCT payable by negotiating on the purchase price. 

If you’d like more information on the above, talk to us.