A deal between Australia and the European Union could soon mean the end of the Luxury Car Tax (LCT) and result in cheaper high-end cars.
Talks are back on for a free trade agreement between the two sides, and government officials say the deal could be finished in the coming weeks. The agreement could also lead to better trade for farmers and car buyers alike.
Australia’s Trade Minister Don Farrell met with the European Commissioner for Trade, Maroš Šefčovič, in Paris last week. The two discussed restarting talks that had been on hold since late 2023.
“Both Australia and the EU recognise that now is the time to strengthen our economic partnership,” Mr Farrell said. “We’re working through the remaining issues to try and finalise the deal.”
He also said the goal was “about building economic resilience in a rapidly changing global environment.”
The EU’s Maroš Šefčovič agreed, saying, “We believe we can achieve substantial progress this year.”
Farming is an Issue
One of the major roadblocks to the finalisation of the trade agreement is farming. Australia wants to send more lamb and beef to Europe. But some EU countries, like France, are worried about competition from Australian meat producers.
To help move the deal forward, Australia has said it’s willing to talk about removing the Luxury Car Tax. Most of the vehicles hit by this tax come from Europe.
The LCT is a 33 per cent tax on cars that cost more than a certain amount. Right now, that’s $91,387 for fuel-efficient cars and $80,567 for others.
It was introduced in 1999, but many people in the car industry have called for it to be scrapped. The tax affects cars from brands like Mercedes-Benz, BMW, and Audi the most.
In fact, many of these brands could become thousands of dollars cheaper if the tax is removed.
LCT Might be Ending Soon but Not All at Once
With the trade talks back, the government has hinted that LCT could be slowly phased out as part of the deal.
“We’ve both agreed now that we’re going to restart negotiations,” said Mr Farrell. “
That’ll be kicked off in the next day or two, when we send our officials to Brussels [to] see if we can scope out what are the outstanding issues.”
“We made progress in the last set of negotiations. But the issues that are outstanding are the difficult ones. If this was easy, somebody else would have done it,” he added.
If the LCT is removed, it likely won’t happen in one go. Experts say it might be phased out slowly to protect the resale value of cars already sold.
Dropping the tax too quickly could lower the value of many current luxury cars by tens of thousands of dollars.
Australian trade officials are expected to head to Brussels within days. If all goes well, we could soon see a new trade agreement and possibly the end of the Luxury Car Tax.
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