The new financial year marks a big step change for the LCT in what is considered an efficient vehicle, and what’s not.
The Luxury Car Tax (LCT) thresholds will increase from 1 July, with many new cars set to cost significantly more to purchase and put on the road following changes to what defines a fuel-efficient vehicle.
For the 2024-2025 financial year, the new value threshold for ‘fuel-efficient vehicles’ has been set by the Australian Tax Office (ATO) at $91,387, with ‘other vehicles’ at $80,567.
The new thresholds are up $2055 for fuel-efficient cars, and $3617 for those that aren’t, compared to the 2023-2024 financial year.
Fuel-efficient in this context is now defined as those – mostly electric and hybrid cars – which have a rated combined fuel consumption of 3.5L/100km.
From 1 July 2024, as outlined in the recent Federal Budget, this will be the new definition, which is half the previous figure of 7.0L/100km.
That’s quite a big change, which means a number of popular models – including certain versions of the Toyota Kluger, Mazda CX-90, and Volkswagen Touareg – that previously qualified as frugal now aren’t.
The Budget papers show the LCT will earn the Government $1.29 billion this financial year before falling to $1.11 billion in 2024-25.
Slashing the fuel-efficiency threshold in half is expected to raise an added $155 million over two years from 1 July 2025, bringing the total LCT amount raised to a forecasted $2.47 billion.
The luxury car tax (LCT) was introduced by the Howard Government in 1999. It aimed to protect Australian-made cars and encourage Australian residents to purchase something locally built.
If you import or sell a car with a GST-inclusive value above these LCT thresholds but under two years-old, you must pay LCT except in certain circumstances.
In general, the LCT value of a car includes the value of any parts, accessories or attachments you supplied, or imported, at the same time as the car.
The LCT has been maligned by most major industry players for years, including the Federal Chamber of Automotive Industries and the Australian Automotive Association – as well as several car manufacturers, who are calling for the LCT to be abolished.
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