Long-awaited 'green car' incentives may soon materialise as government considers abolishing Luxury Car Tax

The future of the federal government’s controversial Luxury Car Tax, including whether exemptions should be made for efficient passenger vehicles, will be decided early next year.

As pressure mounts from car-makers pushing for green vehicle reforms, the Australian government has confirmed to motoring.com.au that it is assessing the future of the tax as part of a wider overhaul of vehicle emissions in Australia.

In February this year, a dedicated government forum issued a discussion paper targeting future vehicle emissions.

“One section of the discussion paper (section 5.4) discussed taxes and charges on vehicles, including the Luxury Car Tax, and sought feedback on how these could be reformed to encourage the supply of more efficient vehicles,” a spokesperson for the Department of the Environment and Energy said.

“Feedback on the discussion paper is assisting the government in its consideration of potential measures. The government is due to decide on new vehicle emissions measures in early 2017 following advice from the working group under the forum. Further consultation with interested parties will take place before a decision is made by the government.”

As it stands, the uptake of green cars in Australia is low compared with countries that offer cash-back or ownership incentives, such as the US and Norway. Less than one per cent of all vehicles sold in Australia currently feature electric or hybrid technology.

The government inquiry has been welcomed by US electric car maker Tesla, one of several marques lobbying for state-based incentives such as free stamp-duty, reduced registration fees and open access to transit lanes for green vehicles.

“The Luxury Car Tax was brought in to protect Australian manufacturing; well the timing is right to now look at the next technology that’s coming through, which has an influence on growth of multiple industries – which is what electric cars do,” Tesla Australia spokesman Heath Walker said.

“In terms of what the LCT stands for, it’s no longer supporting manufacturing because it’s ending. I know multiple automotive manufacturers are supporting demolishing that holistically. Whether that’s just for EVs as a trial period or not, that’s our main aim – to get it removed.”

Mercedes-Benz corporate communications manager David McCarthy cautiously welcomed the developments while warning against simply abolishing the tax for electric vehicles.

“The devil is in the detail,” he said. “There’s an opportunity for both the state and federal governments to actually encourage low-emissions or zero-emission vehicles and I think we’ll see some benefit to those markets if they do.

“But first we need to look at how the electricity is generated. In NSW and Victoria, much of the electricity is made from coal, so until electric cars are fuelled purely and simply on sustainable energy, such as solar power. Whilst some are charged with renewable energy the idea of emissions-free motoring is a distortion of the truth.

“The government would also need to consider extending the incentives to plug-in hybrid cars as well. Rather than provide an incentive to a couple of hundred electric vehicles a year — we will bring electric-only vehicles to this market in the future — let’s widen the discussion on incentives to make it attractive to more buyers.

“After all, surely lowering emissions is what we all want and a narrow electric-only incentive won’t do it alone.”

The push for LCT exemption is one of a number proposed initiatives being pitched by a newly-formed ClimateWorks alliance, which includes major electricity and environment stakeholders from around the country along with car-makers Tesla and Renault.

In April this year, a ClimateWorks proposal recommended a national infrastructure deployment strategy for charging stations and the like, along with fleet purchasing policies and exemption on green cars from the Fringe Benefits Tax.

“These measures are aimed at supporting the greater uptake of EVs in Australia, in particular at early stages in order to increase model choice and supporting infrastructure,” the submission to the federal government reads.

“International evidence suggests a strong correlation between sales and the number of vehicle models offered. The lack of vehicle choice in Australia sits alongside the relatively high price of electric vehicles in Australia, where internationally a range of financial and non-financial consumer incentives boost both supply and demand.

“The lack of a national policy framework in Australia has led to limited overall support and incentives in comparison to our global peers, which has contributed to our poor ranking among major OECD countries for the energy efficiency of our transport sector.

“While there is recognition of the short term nature of some recommendations, they are derived from global ‘best practice’ vehicle electrification strategies aimed at near term uptake and support, to ensure Australia is ready for enhanced uptake of EVs in order to meet our climate, energy productivity and air quality goals.”

The LCT is currently imposed at a rate of 33 cents for every dollar of a vehicle’s price (and the cost of its options, if any) over $63,184, excluding on-road costs. Vehicles which consume less than 7.0L/100km are subject to a higher ‘green-car’ threshold of $75,375 plus ORCs.

Mainstream car-makers have long called for the tax to be abolished altogether, accusing the government of unfairly targeting consumers who want safe, advanced and efficient vehicles.