Jobaaj Stories
The Albanese Government has reignited debate over Australia’s Luxury Car Tax (LCT)—a 33% levy on vehicles priced above set thresholds—as it offers to scrap the A$5.2 billion tax to clinch a trade deal with the EU Meanwhile, new legislation tightening the definition of “fuel‑efficient” vehicles signals higher tax bills for many hybrids and PHEVs
What Is the Luxury Car Tax and Who Pays It?
From 1 July 2025, any car with a GST‑inclusive value above the LCT threshold incurs a 33% tax on the excess amount For 2024–25, thresholds are:
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Fuel‑efficient vehicles: A$91,387
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All other vehicles: A$80,567
A family buying a luxury SUV for A$100,000 will pay LCT of (100,000 − 80,567)×0.33 ≈ A$6,414 on top of the sticker price.
Tougher “Fuel‑Efficient” Test Means More Cars Taxed
Under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, the fuel‑efficient threshold tightens from 7 L/100 km to 3.5 L/100 km Only full EVs and plug‑in hybrids now qualify for the higher A$91,387 threshold. All other hybrids and petrol cars face the lower A$80,567 limit, pushing more models into LCT territory.
Real‑World Impact on Buyers and Dealerships
Shoppers targeting popular family hybrids—like the Toyota Kluger or Mazda CX‑60—will find LCT added to their bill, potentially thousands of dollars more Dealers must include LCT in the advertised price, squeezing margins or passing costs to buyers. A$45 K vehicles that just cross the threshold incur no LCT, but stepping above by even A$1 triggers the full 33% on the excess.
Ute Loophole Drains A$250 M: Who Really Pays?
A loophole exempts “commercial vehicles” (dual‑cab utes) from LCT, costing taxpayers an estimated A$250 million annually Wealthy tradies exploit this by registering luxury SUVs as commercial. Critics argue closing the loophole would curb high‑emission ute sales without hurting genuine business users.
Will LCT Survive New Trade Deals?
To win an EU free‑trade pact, PM Albanese has offered to abolish LCT—if Europe opens its markets to Australian farmers Success could wipe out the 33% levy, but only after lengthy negotiations. In the meantime, buyers should budget for higher costs from July 2025.
Expert View: Balancing Revenue and Emissions
Economists warn that scrapping LCT removes an incentive to buy greener cars, while critics say the current tax hampers EV uptake Some propose shifting to a carbon‑based vehicle tax, charging by CO₂ emissions rather than price. This could better align with Australia’s net‑zero goals.
