Luxury often comes at a premium, but that’s not just in terms of the vehicle’s price tag – it’s also in the taxes that come with it.
Luxury car taxes (LCT) are a topic of interest for both enthusiasts and policymakers in Australia, so now that the new LCT thresholds have been released for the 2023/24 financial year, we’ll be breaking down all you need to know about them in this article.
Luxury Car Tax – An Overview
For any cars with higher than average price points, luxury car taxes are applied both to generate revenue for the government and generally promote environmental consciousness. These kinds of taxes have been around since 2001 in Australia, and they tend to rise every year so that they increase alongside inflation rates.
While LCT mainly tries to strike a balance between luxury car ownership and the broader economic/environmental interests of the country, they play a role when regulating the import and consumption of luxury vehicles, too.
The Thresholds: Crossing into Luxury Territory
One of the main tenets of luxury car taxes is the threshold value, which is essentially the monetary point at which a regular vehicle is now considered a luxury car and, therefore, subject to the tax. It’s worth noting, too, that these thresholds are slightly different depending on whether the car in question is fuel-efficient or not, so there are two separate values here.
As it stands, the luxury car tax threshold is as follows:
- For fuel-efficient cars: $89,332
- For other cars: $76,950
As you can see, the threshold is higher for more environmentally sustainable cars, and the reason behind this is just to incentivise ‘green driving’.
So, if the value of the car exceeds the LCT threshold, it’s deemed by the Australian government as a luxury car and is liable for the 33% LCT rate.
Impact on the Market
As expected, luxury car taxes and the 33% rates associated with them are going to have a notable impact on the wider automotive market. Because there are higher taxes on more luxurious cars, it generally leads to reduced demand for some of these vehicles, which often results in manufacturers exploring more sustainable options and technologies instead. Moreover, luxury car taxes can influence consumer behaviour, too, ultimately promoting a shift towards more economical and environmentally conscious choices.
The Australian government continues to refine luxury car tax rates and thresholds every year, whether it’s to generate revenue or incentivise environmentally responsible behaviour, making it crucial to stay up to date with these numbers.
So, if you own a luxury car and need some assistance in your tax planning, contact us today to see if you’re eligible for certain tax deductions or any other financial support by visiting our office at Shop 1/205 Howick Street, Bathurst, NSW, Australia.