The government has announced the Luxury Car Tax will undergo major changes from 2025-
2026. This will see many previously exempt petrol, diesel & hybrid cars hit with tariffs.
Currently luxury car tax (LCT) adds 33% tariff to each dollar above the threshold which is at
$76,950 for vehicles with a rating of more than 7L per 100kms and $89,332 for “Fuel-efficient
Vehicles” which consume less than 7L per 100kms.
As the government is trying to encourage more fuel-efficient vehicles being purchased. The
new LCT will mean that popular family vehicles that currently fall under the threshold will be
subject to this new tax as their fuel consumption is greater than 3.5L per 100kms.
According to the government, the changes are designed to encourage Australians to
purchase fuel-efficient vehicles. This will result in future purchases being in line with the
government’s commitment to reduce greenhouse gas emissions by 43% by 2030.
The changes mean electric or plug in hybrids are likely to be the only vehicles that would be
eligible to comply with the fuel efficiency standards, which means they would have a
threshold of $89,332, while models including the Toyota Kluger & Mazda CX-60 will no
longer be exempt from the LCT as the threshold for these models will be $76,950.
This new fuel consumption threshold will start 1 July 2025 resulting in the government
getting an extra $155 million worth of Tax Revenue. This increased revenue does not include
any increase to the LCT threshold due to inflation.
The car companies that would benefit from these tax’s are BMW, who have a fully electric
SUV for under $86,000 and Tesla.
At the moment fully electric cars make up 7% of total vehicle sales, however, it seems the
government is trying to push these sales further.