Retrospective Application of Luxury Car Tax Increase is Unfair

As the national peak body for the new vehicle retail sector, the Australian Automobile Dealers Association (AADA) urges the Government to reconsider the retrospective application of the increase in Luxury Car Tax (LCT).

The task and ramifications of complying with retrospective legislation will leave dealers with a considerable administrative burden and uncertainty. Dealers will need to collect this tax from those customers who purchase applicable vehicles; this includes vehicles on which deposits were paid prior to 1 July 2008. Should the legislation fail to secure passage, dealers will need to reimburse affected customers.

Retrospective application unfairly affects customers who have purchased vehicles that are captured by the LCT. Many of these vehicles are purchased because they offer additional safety and environmental benefits such as greater fuel economy, electronic stability control and reduced tailpipe emissions.

The Government’s decision to increase and retrospectively apply the revised LCT discourages buyers from purchasing technologically advanced vehicles. It is also inconsistent with the Government’s desire to modernise the national vehicle fleet and its much publicised commitment to develop evidence-based policy.

The decision of the Senate to forward the Tax Laws Amendment (Luxury Car Tax) Bill 2008; A new Tax System (Luxury Car Tax Imposition-General) Amendment Bill 2008; A New Tax System (Luxury Car Tax Imposition-Customs) Amendment Bill 2008; A New Tax System (Luxury Car Tax Imposition-Excise) Amendment Bill 2008 to the Senate Economics Committee for inquiry is welcomed by AADA.

However, the now uncertainty surrounding the passage and form underpinning this legislation places dealers in an invidious situation. Where customers have organised finance, these agreements will need to be amended to cover the increased LCT impost. If the Bills are amended or fail to secure passage, affected consumers will incur additional fees and charges on their financing agreements. The current situation will thus incur a significant compliance burden for dealers and their customers.

In keeping with its commitment to developing evidence-based policy, the Government should refrain from imposing the LCT increase until it has considered the Senate’s Report and those forthcoming from the Bracks, Garnaut and Taxation Reviews; otherwise the ramifications for buyers and the new vehicle retail sector are likely to be most serious.


END

25 June 2008

For further information please contact Michael Delaney, Executive Director of AADA on (02) 6273 4333.