180412 toyota landcruiser sahara 02 3hvi
Sam Charlwood17 Jun 2019
NEWS

AADA asks federal treasurer to block Victorian LCT

High Court appeal is also being pursued in a bid to block "punitive" state luxury car tax

The industry body representing car dealers in Australia has taken its battle against a new Victorian luxury car tax to federal treasurer Josh Frydenberg in the hope it will be scrapped.

The Australia Automobile Dealer Association has also begun pursuing a High Court appeal on the matter, declaring the state-based tax undermines federal measures and the government’s ability to negotiate future free trade agreements.

Last week, Victorian treasurer Tim Pallas announced plans to introduce a state-based threshold on cars priced over $100,000, in response to “a massive write-down in revenues”.

The levy would be imposed over and above an existing five per cent import tariff on cars brought in from Europe and the UK, a 10 per cent GST tax and the federal government’s much-maligned Luxury Car Tax, which takes 33 cents in the dollar for vehicles priced above the $66,331 threshold.

Now, the AADA is taking a firm stance. A letter addressed to federal treasurer Josh Frydenberg and sighted by carsales.com.au calls for the Australian government to intervene in the matter and block the Victorian bid, which is set to be introduced from July 1.

If the measure is ultimately approved by the Victorian Upper House, the letter requests the treasurer to impose GST penalties on states and territories who chose to implement their own LCT measures.

“This is a patently unfair tax,” wrote AADA chief executive David Blackhall.

“Treasurer, we believe the Commonwealth has a leadership role to play here and that COAG is the appropriate forum to raise the issue.

“We also believe the implementation of these taxes should have consequences for the states through the distribution of the GST, given that the allocation of this revenue is meant to be applied according the principle of ‘fiscal equalisation’.”

In its May budget the Victorian government proposed the stamp duty on cars priced over $100,000 would increase to seven per cent of their total value. On cars over $150,000 the stamp duty will increase to nine per cent of their total value.

The move isn’t without precedent. Queensland introduced similar measures last year and the NSW opposition also pledged a separate LCT levy before ultimately losing out in this year’s election.

Victoria’s treasurer drew the ire of his constituents last week when he told a Victorian business lunch that consumers saving to buy a LandCruiser – which would be slugged by the new tax – need to “get a life”.

180412 toyota landcruiser sahara 02 3hvi

“They’ve been saving up for 20 years for this? Get a life, I’d tell them,” said Pallas.

AADA deputy chief executive James Voortman told carsales.com.au the independent body was pursuing legal options, including a High Court appeal against the Victorian tax.

Voortman warned the proposed measures would have a negative outcome for industry, which has been hardest hit in Victorian sales with 14 months of decline.

“The High Court appeal is something we’re very interested in exploring. We haven’t had any formal legal advice on this but it’s something we’re looking at.

“We’ve written to treasurer Tim Pallas. We believe this is the wrong time to introduce a state-based luxury car tax; the market in Victoria is down by 10 per cent. We’ve asked for a meeting to lay down our arguments and we haven’t heard back.

“Pallas thinks a tax on luxury goods plays out well with the electorate but the flip-side of the argument is these people are buying products from Australian businesses [dealers] and they are going to be impact by this.”

In addition to its approach to Frydenberg and legal appeals, the AADA is considering commissioning research on the impacts of the luxury car tax and how a state-based system would play out in the real world.

“This Victorian government has already made a significant increase to duties across the state. Motorists are paying their way as it is,” Voortman argued.

“It seems cars are an easy target. Why not go after private jets or luxury yachts?”

The Victorian proposal is due to be considered by the Upper House in the coming days. The government forecast the measure would bring an additional $260 million to its coffers in the next financial year, even though it wouldn’t apply to green vehicles and primary producers.

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