Government raises LCT threshold

The Australian Taxation Office (ATO) has announced a change to the threshold for the controversial Luxury Car Tax (LCT).

The Australian Taxation Office (ATO) has announced a change to the threshold for the controversial Luxury Car Tax (LCT), potentially reducing the cost of options for vehicles priced right on the cusp of the threshold.

For the 2017-18 financial year the threshold applicable is $65,094, but for the next (2018-19) financial year the threshold will rise to $66,331 – an increase of $1237.

That increase is based on a change to the CPI (Consumer Price Index) in the current financial year.

Unfortunately, for fans and supporters of green cars, the higher threshold applicable to cars consuming fuel at the rate of 7.0L/100km or less remains at $75,526 – the same as the previous financial year.

In fact, while the lower threshold has risen by $9151 over 10 consecutive financial years (including 2018-19), the green-car threshold has increased by just $526 during the same period, as we've reported in the past.

The new threshold will have little impact on the price of vehicles like the BMW X3 xDrive30i – even though it consumes fuel at the rate of 7.6L/100km.

BMW advises the X3 in that variant costs $66,733 before application of the 10 per cent GST and 33 per cent LCT. With the GST applied the price of this vehicle is $73,406. Currently, with LCT on top, BMW is charging buyers $75,900.

The new threshold may reduce the price by around $160. Not much... and there'll be no saving on option prices at that level.

Most prestige cars in that grey area of pricing, particularly from the three German brands, are 'green' cars – using less than 7.0L/100km. The revised threshold has little impact on the pricing of these vehicles.

So the numbers don't add up to a lot, but with a European free-trade agreement in the works, the LCT may not be around very much longer anyway.