24-05-2025
Calls to end major $250 million loophole amid destructive trend on Australia's roads
There are growing calls for Australian state governments to rethink their approach to how much drivers pay to use the roads and for the federal government to end a perverse incentive pushing Aussies to embrace oversized utes and trucks. As bigger and bigger cars proliferate on our roads, the massively accelerating trend is costing taxpayers, worsening congestion and polluting the environment, critics say.
The luxury car tax means Aussies who are buying a car worth more than $80,576 (this financial year) will pay an extra tax on the cost of the vehicle above that amount. However a loopholes 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.
Associate Professor Milad Haghani, an expert in urban resilience at the University of Melbourne, is among those who continue to question why the exemption 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 Australia.
"Because if somebody is looking at a price range of $80,000 and above, there's really an incentive to buy a pick-up truck or big car because then they get exempted from the whopping 30 per cent luxury tax and it becomes quite attractive to the buyer.
"And a lot of the buyers don't use it for commercial purposes," he added.
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The status quo means every tax payer is "effectively subsidising" the purchase of such mega utes Prof Haghani said. The Australian Institute recently calculated that comes at a cost of about $250 million a year.
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.
According to Prof Haghani, a large ute that is twice the size of a smaller car will have 16 times the impact when it comes to road damage. That's because of something called the fourth powered law "which is a very known thing in pavement engineering that says the amount of damage is proportional to the fourth power of its axle weight. So if the axle weight is doubled, the impact is 16 times bigger."
New road charge for certain drivers foreshadowed by federal government
Less than 25 years ago, Australian buyers overwhelmingly bought small passenger vehicles like sedans and hatchbacks. But according to Prof Haghani, their percentage of new sales has plummeted in recent years, now making up just 17 per cent of new car sales. Instead, 80 per cent of cars bought in Australia are either an SUV, ute, van or light truck.
While Aussie consumers appear to be embracing them, certain local politicians, like city councillors in Melbourne, have been pushing back against their adoption. Last year the Yarra City Council unanimously voted to investigate the potential to raise parking fees for large vehicles — following a policy adopted in Paris which has seen larger SUVs slugged a $30 per hour rate to park in the inner city.
Greens Councillor Sophie Wade who led the push told Yahoo News the city's streets simply "weren't designed for this kind of vehicle." Such a reality is clearly evidenced by the fact Standards Australia has been mulling whether to increase the size of standard carpark spaces due to the trend.
Prof Haghani would also like to see state registrations overhauled to put emphasise on the size of the vehicle and make the owners of American style large utes and trucks pay more.
Currently, only NSW and WA consider the weight of the vehicle when charing for registration. Queensland and Tasmania use the number of engine cylinders, which is a proxy while Victoria set fees based on location.
"What would a truly equitable registration fee model look like? Based on the evidence, it would not only account for vehicle size and weight, but also how often the vehicle is driven," he wrote this week in The Conversation.
As it stands in most jurisdictions, "the registration fee system is just not a fair and equitable one," he told Yahoo.
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