The Government will increase the luxury car tax rate from 25 per cent to 33 per cent from 1 July 2008. There will be no changes to the luxury car tax threshold (currently $57,123).
Since 1979, successive Australian Governments have taxed 'luxury' vehicles more heavily than other vehicles.
The luxury car tax was introduced in 2000 when the goods and services tax (GST) was introduced and the wholesale sales tax abolished. Since that time there has been no change to the luxury car tax rate.
The Government now considers an increase in the luxury car tax rate to be appropriate. The Government believes that Australians who can afford luxury vehicles have the capacity to contribute to revenue at a higher rate than other car buyers. This is part of the Rudd Government's plans to make the tax system fairer.
The measure is expected to raise $555 million over four years and to contribute to the necessary task of ensuring that the Budget relieves pressure on inflation.
The luxury car tax applies to both domestically produced and imported vehicles.
The tax change will result in a car with a current price of $100,000 (inclusive of goods and services tax and luxury car tax) being subject to an additional $2,541 in luxury car tax.