Toyota, which claims to be Australia’s leading manufacturer, importer and exporter of cars, has recommended the abolition of the federal government’s luxury car tax, following media reports of buyer expoitation of a tax loophole.
The Australian Financial Review said luxury vehicle buyers were posing as wholesale car dealers to buy prestige cars without paying tens of thousands of dollars in luxury car tax, amid growing discontent with the levy.
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“A high Australian dollar and limited attention from the Australian Taxation Office (ATO have encouraged ‘rampant rorting’ of a tax loophole that allows car enthusiasts to quote an Australian Business Number to defer paying the tax because they claim their new cars are ‘trading stock’,” the report said.
“Instead, the cars are used for personal purposes and then off-loaded after two years when they are no longer liable for the luxury car tax.
“Concern about the practice comes as the car industry demands that the Gillard government overhaul a ‘weeping sore of a tax’ and the auditor-general warns that the rise in motor industry tax evasion could be larger than the ATO has realised.
“Some prestige vehicle importers, speaking to The Australian Financial Review on the condition of anonymity for fear of reprisals, told of ‘rampant rorting’ of the system in Sydney, Melbourne and Brisbane by professionals such as lawyers, dentists and engineers, as well as underworld figures.
“They said exploitation of the tax loophole was growing by 10% a year because the federal government did not have the resources to check which taxpayers were legitimate car wholesalers, against those who bought the cars as ‘trading stock’ and simply kept them for personal use.
“Under the tax laws, the luxury car tax applies to cars less than two years old and worth more than A$57,466 or more than A$75,375 for vehicles considered to be fuel efficient.
“It is understood that people who have bought expensive cars as ‘trading stock’ have merely kept them for two years before selling them through online car websites or on consignment for less than their legitimate competitors.”
The recommendation to abolish the tax is consistent with the 2010 Henry Tax Review, Toyota Australia said.
Sales and marketing chief David Buttner said the tax was inefficient, punitive and poorly designed.
“Toyota is Australia’s number one luxury car brand according to the [tax] regime. In 2010 the top two vehicles exceeding the [tax] threshold were the Toyota Prado and LandCruiser with 15,423 and 7,273 car sales respectively,” Buttner said.
“The current luxury car tax was introduced in 2000 and since then the price customers are prepared to pay for cars has risen. However the tax threshold has not kept pace and today customers have to pay an unfair tax on cars that exceed A$57,466, a level that most people would not consider to be a luxury car.”
Toyota Australia believes the tax also penalises people who customise their vehicles.
“With an increasing number of accessories, such as roof racks, bullbars and tow bars available as vehicle extras, vehicles priced below or on the cusp of the luxury car tax threshold currently creep past the threshold once the accessories are added,” Buttner said.
He said the tax was discriminatory because it only applied to vehicles and no other luxury item.
“Toyota Australia and the Federal Chamber of Automotive Industries have long opposed the [tax] on the basis that no other consumer product has an additional tax applied simply because the value of the product exceeds an arbitrary threshold.
“It is a tax people have to pay in addition to GST [Australian sales tax – ed], stamp duty and registration fees when buying a new car. On top of that they pay tax on the fuel they use in their cars,” Buttner said.
“Toyota Australia would like to see the luxury car tax abolished. But if not, then at the very least, it should be fundamentally reformed to feature a more realistic threshold and to exclude low emissions vehicles and parts and accessories from the tax,” Buttner said.
