Bills Digest no. 66 2008–09
Tax Laws Amendment (Luxury Car Tax–Minor Amendments) Bill
2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced:
25 November 2008
House: House of Representatives
Portfolio: Treasury
Commencement:
Sections 1 to 3 of the
Bill and Schedule 1, items 1 to 7, Royal Assent. Schedule 1, item
8, 3 October 2008.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill amends the A New Tax System (Luxury Car Tax) Act
1999, the Taxation Administration Act 1953, and the
Tax Laws Amendment (Luxury Car Tax) Act 2008 to ensure
that amendments to the Tax Laws Amendment (Luxury Car Tax) Act
passed earlier this year operate as intended .[1] It appears that the current
uncertainties relate to the effect of motor vehicle financing
arrangements on these amendments.
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Background
Changes to the luxury car tax (LCT) were contained in the Tax
Laws Amendment (Luxury Car Tax) Bill 2008 introduced into the
Parliament on 26 May 2008.[2]
The Bill was passed by the Senate on 24 September 2008 with
amendments which were agreed to by the House of
Representatives.[3]
The Tax Laws Amendment (Luxury Car Tax) Act 2008 received
Royal Assent on 3 October 2008 and commenced on that date.
The basis for the increase in the rate of LCT from 25 per cent
to 33 per cent was to protect the market pricing of locally
produced vehicles and to re-invest the additional revenue into the
local industry.[4]
LCT as set out in the new Act is based on a price threshold and
other factors, including fuel consumption, usage and the method of
indexing the LCT threshold.
However, since the amendments were passed economic conditions,
and in particular the global financial crisis and a manufacturing
slowdown, have resulted in a fall in vehicle sales and a revision
of the Government s estimates of the amount of revenue that will be
raised by the increase in LCT.
Vehicle sales for October show an 11.4 per cent fall compared to
the same month in 2007 (see table below). According to the Federal
Chamber of Automotive Industries, the fall reflects the broader
slowdown in Australia and globally, as well as reduced access to
car finance.[5]
Sales Volumes
|
Month
October
|
YTD
|
Variance +/- Vol. & %
|
|
|
2008
|
2007
|
2008
|
2007
|
MTH
|
YTD
|
MTH
|
YTD
|
|
Passenger
|
45,978
|
53,336
|
508,050
|
531,102
|
-7,358
|
-23,052
|
-13.8
|
-4.3
|
|
SUV
|
14,357
|
17,748
|
167,300
|
163,360
|
-3,391
|
3,940
|
-19.1
|
2.4
|
|
Light Commercial
|
15,686
|
14,537
|
158,514
|
147,211
|
1,149
|
11,303
|
7.9
|
7.7
|
|
Heavy Commercial
|
3,084
|
3,668
|
30,173
|
29,978
|
-584
|
195
|
-15.9
|
0.7
|
|
Total Market
|
79,105
|
89,289
|
864,037
|
871,651
|
-10,184
|
-7,614
|
-11.4
|
-0.9
|
|
|
Month
|
YTD
|
Variance +/- Vol. & %
|
|
Light
|
9,972
|
11,150
|
107,415
|
105,693
|
-1,178
|
1,722
|
-10.6
|
1.6
|
|
Small
|
17,339
|
19,228
|
196,217
|
194,416
|
-1,889
|
1,801
|
-9.8
|
0.9
|
|
Medium
|
7,038
|
7,952
|
74,092
|
76,057
|
-914
|
-1,965
|
-11.5
|
-2.6
|
|
Large
|
8,956
|
11,170
|
99,694
|
117,778
|
-2,214
|
-18,084
|
-19.8
|
-15.4
|
|
Upper Large
|
302
|
762
|
4,916
|
7,934
|
-460
|
-3,018
|
-60.4
|
-38.0
|
|
People Movers
|
1,118
|
1,283
|
11,098
|
13,692
|
-165
|
-2,594
|
-12.9
|
-18.9
|
|
Sports
|
1,253
|
1,791
|
14,618
|
15,532
|
-538
|
-914
|
-30.0
|
-5.9
|
|
SUV Compact
|
6,791
|
8,089
|
73,037
|
75,324
|
-1,298
|
-2,287
|
-16.0
|
-3.0
|
|
SUV Medium
|
5,382
|
6,839
|
64,896
|
61,215
|
-1,457
|
3,681
|
-21.3
|
6.0
|
|
SUV Large
|
1,001
|
753
|
13,169
|
10,049
|
248
|
3,120
|
32.9
|
31.0
|
|
SUV Luxury
|
1,183
|
2,067
|
16,198
|
16,772
|
-884
|
-574
|
-42.8
|
-3.4
|
|
x
|
264
|
215
|
2,989
|
2,067
|
49
|
922
|
22.8
|
44.6
|
|
Vans
|
1,856
|
1,686
|
21,204
|
16,740
|
170
|
4,464
|
10.1
|
26.7
|
|
PU/CC 4X2
|
6,261
|
5,975
|
62,404
|
57,597
|
286
|
4,807
|
4.8
|
8.3
|
|
PU/CC 4X4
|
7,192
|
6,555
|
70,874
|
69,643
|
637
|
1,231
|
9.7
|
1.8
|
|
Trucks 2.5-3.5 GVM
|
113
|
106
|
1,043
|
1,164
|
7
|
-121
|
6.6
|
-10.4
|
|
Heavy Commercial
|
3,084
|
3,668
|
30,173
|
29,978
|
-584
|
195
|
-15.9
|
0.7
|
|
Total Market
|
79,105
|
89,289
|
864,037
|
871,651
|
-10,184
|
-7,614
|
-11.4
|
-0.9
|
As a result of falling vehicle sales estimates of LCT revenue
have been revised down by $20 million in each of the forward
estimates.[6]
The fall in vehicle sales coincides with a manufacturing
slowdown and a fall in manufacturing employment.
Manufacturing activity, as measured by the Australian Industry
Group PricewaterhouseCoopers Performance of Manufacturing Index,
fell in October 2008 to 40.4 points, the lowest recorded level
since the index began in 1992. This followed four successive months
of decline and confirms that manufacturing output is contracting
(the 50.0 level in the index separating expansion from
contraction).[7]
Critically the fall in manufacturing production reflects a
continuing decline in new orders, slower domestic economic growth
and cost pressures.[8]
According to the index, manufacturing employment fell in most
sectors with wages growth slowing in October.
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According to the Explanatory Memorandum, the Bill will have no
financial impact.[9]
Items 1 to 4 of Schedule 1 to
the Bill propose to clarify the entity bearing the LCT for the
purpose of claiming the refund.
Item 5 ensures that the date of operation is
from 1 July 2008.
Item 6 amends the Taxation Administration
Act 1953 to clarify that LCT refunds are to be paid directly
to the claimant.
Item 7 ensures that the date of operation of
this amendment is from 1 July 2008.
Item 8 amends the Tax Laws Amendment
(Luxury Car Tax) Act 2008 so that contracts for the taxable
supply or taxable importation of a vehicle that are entered into
before 7.30 pm on 13 May 2008 are relevant for determining the 25
per cent LCT. Item 8 commences immediately after the commencement
of the Tax Laws Amendment (Luxury Car Tax) Act 2008 on 3
October 2008.
Concluding comments
The outlook for Australian vehicles sales for 2009 is not strong
and the Government has already revised downward its estimate of
revenue from the LCT. The recent and rapid depreciation of the
Australian dollar will further impact vehicle sales. In certain
areas the luxury car market does not seem to be on the decrease,
for example hybrid luxury vehicles and SUV diesel models, but this
does not necessarily guarantee that the market overall will not be
affected by an economic slowdown.
Michael Priestley
28 November 2008
Bills Digest Service
Parliamentary Library
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