Negotiations over a free-trade agreement with the EU are part of the push to get rid of the LCT.
Audi Australia is convinced the luxury car tax (LCT) will be removed in the near future, as the Australian Government and European Union continue to hash out a free-trade agreement – but the changes remain delayed until the fallout Britain’s European Union exit is complete.
The LCT is a 33 percent tax on cars costing over $66,531 with fuel usage over 7.0L/100km, or cars worth more than $75,526 using less fuel than that. The tax applies on the portion of price over the relevant threshold, which is then amplified with 10 per cent GST and a 5 per cent tariff on European goods – essentially a tax, on a tax, on a tax.
Speaking to CarAdvice at the e-tron launch in San Francisco, Paul Sansom, managing director of Audi Australia, said the LCT remains an unfair impost on manufacturers, especially those from Europe, but suggested that it’s only a matter of time before it’s removed.
“The purpose that it was there for no longer remains,” Sansom told CarAdvice, emphasising along with the five per cent tariff on European goods, the LCT’s reason for existence – protecting local carmakers – is no longer relevant. Despite that, the LCT continues to create a ‘two tier market’.
“It’s a tax on innovation, safety and environment," Samson argued, "so if we think about premium cars being the cathedral of those things, that’s where these innovations begin, then it’s in everyone’s interest that we level the playing field.
"So we are lobbying just as hard as our competitors, and we stand shoulder-to-shoulder with them on those topics.”
According to Sansom, the LCT plays a big role in negotiations between the EU and Australia as they nail down a free-trade agreement (FTA).
“It’s definitely part of the discussion in government with the FTA with Europe, but I don’t have a timeline on it, but what that FTA depends on is what happens in Europe, what happens with Brexit," Sansom said.
"Most things are getting delayed until post-Brexit, what Australia will set up with UK and so on."
“[Brexit is] going to delay things, [but] I am absolutely convinced it will come. It will be part of the FTA, [there will be] no FTA without it. It’s a really strong part of the Australian negotiation that is there today, and in the give and take of the FTA it's something that will be discussed.”
Sansom said the unfairness of the tax is essentially no longer in dispute, it’s just a matter of time before it’s removed – although a predicted change in Federal Government may further delay things.
Interestingly, Audi is already working on plans for how to manage the removal of LCT across its network and how that will impact its business in the crossover period.
“We are planning now on what happens post LCT. Is it going to be phased out? We can’t just expect to switch it off, that would need to be handled particularly carefully for all stakeholders, importers, dealers and most importantly customers," Sansom explained.
"It has to be well thought through, those discussion need to take place now on the basis that it’s a fair chance that process could begin [soon].”
Audi's conviction on the removal of LCT echoes that of Mercedes Benz.