Protecting a dead industry: Luxury Car Tax & Import Duty

QUESTION

Hi John,

Just a question thou, since there are no Australian cars being made here in Shitsville, shouldn’t government be also dropping the international car import tax now? I suspect they wont coz they are just greedy bastards.

Thanks,

Daniel

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ANSWER

Civic duty

The federal government is addicted to revenue, we all know this.

Daniel, you’re talking about the import duty applied to new cars. It works like this:

A car lands here for $30,000, to be sold for $40,000. The import tariff is applied to the landed cost at 5 per cent on top ($1500), the rest up to that $40k is the importer’s profit margin and the dealer’s profit margin.

Interestingly, they don’t disclose the exact import duty amount payable on any car because the car industry doesn’t want you to know because if you knew that, you could reverse engineer their profit margins. You could calculate the landed cost based on the duty payable and then you look at the retail price, subtract the two costs and then you’d be in a more powerful position to negotiate at the dealership.

So, the car industry has lobbied the government and made sure that undisclosed import duty information is kept commercially in confidence.

Now, before you get your nose outta joint about this, keep in mind that our three key automotive trading partners, Japan, Thailand and South Korea, where most of our new cars come from - we have free trade agreements with them. We also have an FTA with Retardistan (‘Merica).

In 2019, we imported roughly 334,000 new cars from Japan, 271,000 from Thailand, 151,000 from South Korea, and 41,000 from the USA. So, that’s about 800,000 cars in a market of about 1.1 million new cars. So the vast majority of new cars coming here are not subject to import tariffs. But there are about 200,000 new cars still subject to paying import duty.

Pro tip: It’s not about where the brand is based geographically. It’s about where the factories are located. You get unexpected anomalies in the system. Take Renault for example: you think they’d be made in Europe and cop the import tax, but the Koleos is built in South Korea, so there’s not import duty applied to that car. Reason being, Renault has a partnership with Samsung and builds its Koleo there.

You’d have to say there’s about one billion Aussie dollars still payable in import tariff every year, which does seem incredibly inequitable because it’s a tax designed to protect our dead-and-buried local car manufacturing industry.

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Tax invasion

A bigger problem is Luxury Car Tax, largely because it too was imposed specifically to protect local carmaking but is still here. And because of that, you now pay handsomely for the snob effect >>

LCT works like this. You pay it above a retail price of $66,000 for conventional cars, and $75,000 for so-called ‘fuel efficient’ cars. So from either one of those tiers, depending on the type of vehicle, above that threshold it is subject to Luxury Car Tax.

CARS THAT BEAT LUXURY CAR TAX

PERFORMANCE: Subaru WRX STI >> & Hyundai i30 Fastback N >>

GT/TOURING: Kia Stinger GT >> / Mazda 6 Atenza wagon

PRESTIGE: Hyundai Santa Fe Highlander >> & Mazda CX-9 Azami >>

Take a $100,000 conventional car, there’s $34,000 or margin above the $66,000 threshold, so about 25 per cent of that margin is subject to LCT. Or in other words, a quarter of that margin is Luxury Car Tax.

On on that $100,000 car, that’s $8000 of LCT.

When you look at Mercedes-Benz, BMW and Audi sales in Australia, and combine their sales, you get about 75,000 vehicles. Now, I don’t know the average price of those vehicles is, but let’s say for argument’s sake, the average price of those combined vehicles, per unit, is $166,000 per car.

That’s $25,000 in Luxury Car Tax, times 70,000 units, which equals 1.75 BILLION dollars.

Combine that with the import tariff on 200,000 cars, of roughly $1 billion. So that’s nearly $3 billion to protect an industry which hasn’t existed for years.

Politicians are arseholes, I get that, and they want the revenue - I get that also. But if we want to tax luxury as a society, we should have informed debate about that, and let’s tax everything else luxury. This abolish-LCT discussion has been going on for years >>

Brands entangled in Luxury Car Tax:
Alfa Romeo >>
Aston Martin
Audi >>
Bentley
BMW >>
Ferrari
Genesis >>
Land Rover >>
Lexus >>
McLaren
Mercedes-Benz >>
Porsche >>
Tesla >>
Volvo >>

Let’s tax watches and yachts, luxury apartments, luxury handbags and shoes. Because if the concept of luxury is taxable, let’s be equitable and debate it, let’s define it, and let’s give good reason for it.

We have not had that debate.

Luxury car tax is just there to protect a dead industry, it’s not there because society demands a tax on luxury goods. We already pay GST which is proportional to the price.

I don’t give a shit if a Rolls-Royce buyer has to pay a quarter of a million in luxury tax because he’s probably got it and he can afford it.

These luxury carmakers are arseholes too. They absolutely sing about being against LCT, but play this grubby game of politics with their lobby group in Canberra with the ethics of getting rid of it. But they don’t have the moral compass to just announce LCT is unethical and bad and must be cut out like a cancer - while dealing with the fallout as it comes.

What they do is deliberate over the fallout, they wonder what current owners will think if tomorrow’s prospective buyers don’t have to pay LCT but yesterday’s buyers did. The buyer of an E-Class today pays luxury car tax, but if they kill LCT tomorrow, ongoing buyers will get their Merc considerably cheaper.

Then there’s re-sale value which takes a hit. Likewise all these other fat cats whose re-sale tanks.

These luxury car brands forget what’s moral and ethical, they think about how they’ll sell more cars next month. They focus on those politics, which leads them astray.

The victims of Luxury Car Tax, which is the brands trying to sell those luxury cars - BMW, Mercedes, Audi et al. - they are not strenuously advocating for their customers by demanding the immediate removal of this shameful, unjust tax. They’re playing a filthy game of politics with next month’s sales.

If you’ve had enough of this problem, you need to get involved by writing to your local member and tell them. If enough people do it, they might even march into Canberra and demand change.

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