Luxury Car Tax and the ute loophole - Expensive utes are exempt from Luxury Car Tax,

Jack Thrower July 2024 INTRODUCTION Even though the transport sector is the third largest source of Australian emissions and accounted for 21% of national emissions in 2023, the Australian Government continues to incentivise the sale of big utility vehicles (utes) relative to other car options.i Over the last twenty years, the number of utes on our roads has grown much faster than the number of pa. [...] A higher threshold is applied for fuel efficient vehicles, such as electric vehicles and hybrids, this threshold is $91,387 for 2024-25.iii The rate of the tax is 33%, this is applied to the value of the car above the LCT threshold, and a formula is applied to subtract the value of GST from the car’s price. [...] WHAT IMPACT DOES THIS HAVE? How much does this loophole cost? While the Treasury annually calculates the cost of other tax exemptions, such as the exemption of fresh fruit and vegetables from GST, there is no government measure of the cost or distributional impact of the ute exemption. [...] Publicly available data indicates that a considerable number of utes are likely exempt from LCT each year, notably many of the 2023 best-selling utes have model variants whose cost exceeds the LCT threshold (such as the Ford Ranger and Toyota HiLux).xv Most of the cost of this exemption will relate to large, expensive utes, such as those produced by Ram and Chevrolet.xvi The price of these vehicle. [...] • LCT threshold assumed to be $74,399.50, the average of the rates for 2022-23 and 2023-24, this is conservative as the first half of the year usually includes disproportionate sales as it includes end of financial year.