![Contentious luxury car tax rule changes will apply to previously exempt family-scale hybrids such as the Toyota Kluger. Photo supplied. Contentious luxury car tax rule changes will apply to previously exempt family-scale hybrids such as the Toyota Kluger. Photo supplied.](/images/transform/v1/crop/frm/32XghFRykTWK8psrWNhdBMC/44a37d55-9f52-4cee-9b55-be7596cb8e45.jpg/r316_237_3000_1737_w1200_h678_fmax.jpg)
Rural sector motorists choosing to "green up" their vehicle choices with a family-sized hybrid petrol-electric model may find themselves penalised with a luxury car tax next year.
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A federal government decision late last year has moved the luxury car tax goal posts.
Vehicles costing more than $89,332 (including GST) will need to have a fuel consumption rating of less than 3.5 litres for every 100 kilometres travelled to be exempt from the contentious tax.
At the moment the luxury tax on big ticket fuel efficient all wheel drives does not apply if they consume up to seven litres/100km.
The tax currently adds a 33 per cent tariff to every dollar of a vehicle's price above $76,950 if it uses more than seven litres/100km, but the tax threshold does not kick in for more fuel efficient vehicles until their price tag exceeds $89,300.
The big change - part of the government's drive to encourage more fully electric vehicle sales - has been an unexpected penalty on bigger hybrids such as the Toyota Kluger or Mazda's CX60.
It will also hit some previously-exempt mid-sized petrol and diesel cars as they slip into the early LCT category.
The rule change, due to apply from July 2025, is a "tough one", said Federal Chamber of Automotive Industries advocacy and communications director, Peter Griffin.
"It potentially makes it even more difficult for businesses and families to adopt low emissions technology," he said.
"Most hybrids will now be subject to the lower LCT threshold of $76,950."
Fortunately for primary producers he said there was still the option to apply for an LCT refund.
Up to $10,000 can be claimed on one new vehicle per year, but it must be principally used for primary production or for work.
Treasurer, Jim Chalmers, has justified the proposed tighter parameters as encouraging a greater uptake of fuel efficient car use to support the government's 43pc national greenhouse gas emission reduction target by the end of the decade.
However, the FCAI and other motoring industry critics have blasted the decision as a cynical revenue grabbing exercise, noting Canberra was budgeting to generate at least $150 million in the first two years of its implementation.
"If the Australian Government wants to modernise the luxury car tax, they should remove it as part of true tax reform for the transport sector including consideration of a road user charge," said FCAI chief executive, Tony Weber.
The FCAI represents most car companies in Australia.
"The LCT penalises Australian consumers, as it imposes unnecessary additional taxes on many low emission technology vehicles," he said.
Mr Griffin noted while not many hybrid vehicles existed in the bigger four wheel drive market because battery technology was still catching up with the power demands required, manufacturers were fast developing new generation options and batteries were getting lighter and smaller.
"Unfortunately, we see the government's decision to change the rules as a tax on car manufacturers as they strive to develop the new technology we really need," he said.
"More expensive cars come with the sort of technology breakthroughs which improve engine performance and safety and have greater environmental benefits."
In fact, the luxury car tax served no clear purpose at all given the Australian car industry relied on imports and no longer manufactured any vehicles for the mainstream market.
The LCT was introduced by the Howard Government as a protective strategy to help local car makers, but aside from its government revenue raising benefit now served no purpose.
"Our view is the luxury tax is outdated, antiquated and disadvantages motorists in general," Mr Griffin said.
"It should be abolished."
The motoring and transport industries needed more serious tax reform than tinkering with the LCT, including confronting the reality of shrinking fuel excise earnings as more electric vehicles took to the roads.