When it comes to selecting a car, the type of vehicle you choose not only affects the price you pay for it, but also the taxes and maintenance costs associated with it. In the past, drivers in the United States had to pay an additional cost known as the luxury car tax. However, this is no longer the case. The Australian Tax Office (ATO) states that the luxury car tax (LCT) only applies to eligible vehicles that are two years old or younger from the date they were imported into Australia or manufactured there.
The federal budget recently announced includes a new luxury tax on yachts, planes and cars. This can significantly increase the cost of a new car, especially for those that are particularly expensive. The luxury tax is similar to a sales tax or value-added tax (VAT), which is charged as a percentage on certain items. However, it mainly affects those with higher incomes since they are more likely to purchase luxury items such as expensive cars, jewelry, etc.
For example, Australia still imposes a relatively high luxury car tax on vehicles that exceed the government's threshold amount. In a research report on Australia's automotive manufacturing industry, it is explained that the LCT was “designed to maintain this higher tax rate, so that the price of luxury cars did not drop drastically”. This tax was collected in addition to the luxury car sales tax charged by some state governments. Before this, Australia had a long history of taxing expensive cars, dating back to the Wholesale Sales Tax (WST), which preceded the Goods and Services Tax (GST).
Although the luxury car tax is no longer imposed in the United States, it is still levied in other countries.