Car dealers reeling from luxury car tax increase

Car dealers say the Rudd Government’s decision to increase luxury car tax could cause chaos in the industry.

The increase, which will be formally announced in tomorrow’s federal budget, will see the tax on vehicles worth more than $57,000 increase from 25% to 33%. That would increase the price of a $100,000 vehicle by about $2600, according to estimates from Treasurer Wayne Swan.

Ben Haywood, sales manager at Melbourne Mercedes Benz dealership Barloworld Motors (Brighton), has slammed the tax increase as illogical, “particularly when there is no luxury tax on things like helicopters or boats”.

He expects the change will have a big impact on the luxury market, although the size and nature of that impact will depend on the timing of the change. If it is brought in from 1 July, Haywood is tipping a explosion in luxury car sales in the next two months, followed by a more quite period. If the increase is brought in immediately, luxury car sales will plummet immediately.

Either way, Haywood says the changes will cost dealers money, and that will eventually hurt ordinary automotive workers such as mechanics and technicians. “We simply won’t have any money for wages rises for the people the government says it is trying to help,” Haywood says.

But it won’t just be luxury vehicles from BMW, Mercedes Benz and Porsche that will be hit. Andrew McKellar, chief executive of the automotive industry’s peak body, the Federal Chamber of Automotive Industries, says that many family cars, including locally made Holden and Ford models, fit into the over-$57,000 category, because the threshold has not kept pace with increases in vehicle pricing. “This tax increase will hurt many families who are looking at buying a vehicle with the space and safety features they want. This tax is unnecessary and discriminatory and should be abolished altogether, certainly not increased.”

Shaun Swift, the managing director of listed dealer group Adtrans, says he is still trying to come to grips with exactly how the change will hurt his business. “It will have some impact, there’s no doubt about that.” While the impact on Adtrans will be limited because it does not distribute any luxury brands, Swift says tax increases are never good for the sales industry. “It certainly doesn’t help us.”