EV insider calls out Aussie loophole as potential tax change looms: 'Doesn't make sense'
The Australian boss of premium electric vehicle brand Polestar is the latest to campaign for a big rethink of how the federal government's Luxury Car Tax (LCT) is administered, describing it as serving no purpose and creating a reality in Australia that "doesn't make any sense".
The luxury car tax means Aussies who are buying a car worth more than $80,576 will pay an extra tax on the cost of the vehicle above that amount, with a higher threshold of $91,387 for certain "fuel-efficient vehicles" such as hybrid models.
The luxury tax is charged at a rate of 33 per cent for every dollar above these thresholds, however a loophole means most utes and SUVs are exempt because they are classified as light commercial vehicles regardless of whether they are bought for private or commercial use.
Over the years, that has incentivised buyers to opt for large American-style utes to avoid paying the tax, with many critics pointing out that taxpayers were subsidising the purchase of cars that are worse for the environment and cause more damage to roads than their lighter counterparts.
Related: Calls to end major $250 million loophole in Aussie car market
Scott Maynard, managing director of Polestar in Australia, is pushing for things to change, arguing the tax should simply go, noting that it was originally brought in to protect local car manufacturers but "we don't have a local car industry to protect" anymore.
"It is a tax without a purpose," he told CarSales last week. The EV exec doubled down this week saying the situation has become perverse in our car market and highlights the much-maligned exemption.
"We've now got more than one and a half times the dual cab ute to tradie ratio, which doesn't make sense," he told NewsCorp papers.
"If you consider some of the positioning of some of those particular vehicles, which are clearly no longer tools of trade, I don't think it's a difficult jump to make to put that on the fact that they've enjoyed a tax let-off since 2000."
While Polestar, a Swedish automotive company selling high-end electric vehicles, would benefit from the removal of the luxury tax, Maynard is far from alone in his arguments.
Associate Professor Milad Haghani, an expert in urban resilience at the University of Melbourne, is among the many critics who continue to question why the exemption for larger utes and SUVs is still in place.
"The luxury car tax exception has been one of the biggest incentives for people to go big and buy big cars," he told Yahoo News in May.
The status quo means every taxpayer is "effectively subsidising" the purchase of certain mega utes, he said, "and a lot of the buyers don't use it for commercial purposes".
The Australian Institute recently calculated the loophole comes at a cost of about $250 million a year to the nation's taxpayers. And that's before other externalities that impose a cost on society are considered with research showing the larger vehicles have an outsized impact on worsening congestion, polluting the environment and degrading our roads.
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In May, it was reported the Albanese government is considering changing the tax and potentially lowering the 33 per cent rate, as part of negotiations with Europe over a new free trade deal with the bloc of nations.
Australian Automotive Dealer Association chief executive James Voortman supports the removal of the tax, which raises more than a billion dollars a year for the federal government, but has echoed concerns from manufacturers about the impact of plummeting resale values in the secondhand market.
The Australian Automobile Association and the Federal Chamber of Automotive Industries also wants to see the tax scrapped.
In the event it is phased out, the government would likely look to recoup the lost revenue through other road-related charges.
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