More EVs escape luxury car tax as Bowen promises to remove import duties

Popular electric vehicle models such as the Kia EV6 AWD will escape the luxury car tax after the threshold was raised for the third year in a row, and more concessions are in the pipeline after the new climate and energy minister Chris Bowen re-iterated his promise of removing import duties as well.

The Australian Taxation Office says it has, for the third year in a row, raised the luxury car tax threshold for “fuel-efficient vehicles” – which naturally includes electric vehicles (EVs) – by more than $5,000 to $84,916.

Australia’s LCT imposes a tax of 33% on the cost of the vehicle above the threshold, applying them at different levels for  “fuel-efficient vehicles” – which includes not just EVs but also a generous assessment of seven litres per 100-kilometres – and “other vehicles”.

Other EVs to benefit from the LCT changes will be various models of the Ioniq 5, Tesla Model 3 and the Polestar 2.

Prior to the 2020-21 bump, the LCT level for EVs and other fuel-efficient vehicles had remained relatively stagnant for more than a decade, with an increase of only $526 – while at the same time the LCT for “other vehicles” – which are almost universally ICE models – had increased from $57,180 to $67,525.

There used to be an $18,000 difference in the LCT threshold between fuel efficient and other vehicles when Labor was last in power, but this narrowed to just $8,000 under the Coalition, about the time they were warning EVs would “ruin the weekend”, but have some since increased to around $13,000.

Some, however, have called for the LCT to be abolished altogether for electric vehicles, particularly in the absence of any vehicle emissions standards in Australia.

“We need a heavy weight tax on oversize vehicles, trucks that pose as passenger vehicles, gas guzzlers with V8 engines, and the massive overweight Utes often driven around our cities,” said one person on an EV forum.

Bowen, the country’s first climate and energy minister to drive an EV (his is a Tesla Model 3) has said he will not introduce a vehicle emissions standard, but he has promised to exempt EVs from the 47% fringe benefits tax that are provided through work for private use and to remove import tariffs.

These measures could cut the cost of $50,000 EV by between $2,000 and $9,000, according to the Guardian. Bowen told publication in an interview published on Wednesday that removing the impost would be one of his early priorities after being briefed by departmental officials.