A car costing close to $70,000 in Australia would be around $14,000 cheaper in the United Kingdom. Photo: Supplied
Porsche dealer Sean Lygo says its "totally ridiculous" that Australians pay so much for luxury cars, while the body which represents 7.5 million motorists says the 33 per cent luxury car tax should be scrapped now that the car manufacturing industry is about to close.
Mr Lygo, who hails from the United Kingdom, is the general manager of the Porsche centre in Willoughby on Sydney's lower north shore and says the tax penalises those who may have worked hard to achieve success and want to reward themselves.
"It's unfair. It's totally unfair to charge people 33 per cent for buying a car because they've done well," Mr Lygo says.
It's not just the upper end of the market which is angry at the tax, which the federal government's tax discussion paper, released Monday, says is complex and full of anomalies.
While the Rudd government increased the tax to 33 per cent in 2008, former Treasury secretary Ken Henry called the tax "absurd", a means of penalising "people on average means with a preference for relatively expensive cars".
Joe Hockey's tax paper points out that a seven-seater family vehicle and a small sports car may end up classifed as "luxury cars" under the tax, which raised $476 million in 2013-14, or just 0.1 per cent of total tax revenue.
The paper says changes have made it much more complicated, and it is a barrier to trade because 94 per cent of vehicles subject to the tax are imported according to industry estimates in 2014.
The luxury car tax is applied at a rate of 33 per cent to the GST-exclusive value of the car including accessories, when it exceeds a threshold, now $61,884 for regular cars and $75,375 for fuel efficient vehicles.
A new vehicle costing close to $70,000 in Australia would be around $14,000 cheaper in the UK. Mr Lygo says it is ridiculous, but sales are still brisk, with market demand for new models in the Porsche line-up strong. "We are so busy," Mr Lygo says.
Australian Automobile Association acting chief executive James Goodwin says the tax should be dumped given Ford, Toyota and Holden are all preparing to shut their car making operations by 2017 at the latest.
"If we don't have a local manufacturing industry then why do we need a luxury car tax," he says. The AAA is the over-arching body representing 7.5 million motorists who are part of the various State motoring organisations including the NRMA, RACV, RACQ and RAA.
Mr Goodwin says many of the higher-end luxury car brands from offshore have been pioneers in bringing in new safety features to the Australian market and the tax is a punitive one.
"They're actually punishing the early adopters," he says.
Kayne Theodossi, general manager of Nick Theodossi Prestige Cars in the inner Melbourne suburb of North Melbourne, says he doesn't agree with the tax but thinks it will be difficult for the government to remove it completely because it will likely be replaced with something else to make up for lost revenue.
The dealership sells a range of brands including Lamborghini, Maserati, Aston Martin and Ferrari and Mr Theodossi says business is strong, with many customers business people who have built up their operations over years of hard work, rather than those spending windfalls from a rising sharemarket or soaring property prices.
"The top end is strong. It's more people who've got businesses," he says.
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