Luxury car markets tell senate inquiry tax increase will smash sales

The managing director of Audi Australia has told a senate inquiry that the increase in the luxury car tax on 1 July led to a 25% fall in prestige car sales in July alone, and has warned the fallout will get much worse.

The managing director of Audi Australia has told a senate inquiry that the increase in the luxury car tax on 1 July led to a 25% fall in prestige car sales in July alone, and has warned the fallout will get much worse.

Audi MD Joerg Hoffman told the Senate Standing Committee on Economics hearing in Sydney that the increase in the luxury car tax rate from 25% to 33% on vehicles priced over $51,180 could result in an overall fall in luxury sales of between 40% to 70%.

“We can expect one of the worst months in the auto industry so far,” Hoffman told the committee.

Hoffman also estimated Audi would lose $127 million in profit over the next four years if sales remained depressed and could eventually be forced to lay off staff.

At a hearing in Adelaide last week, the chief executive of the Federal Chamber of Automotive Industries Andew McKellar said the threshold was outdated.

“When the threshold was introduced in 1979, only 2.5% of vehicles exceeded the limit and now it is more than 11%,” he said. McKellar pointed out that it wasn’t just prestige marques like BMW and Mercedes that fall into the category of “luxury” vehicles.

“It would surprise many people to know that Australia’s top-selling ‘luxury’ vehicle is not a Porsche, Ferrari, Rolls Royce or Bentley, but in fact it is a Toyota LandCruiser. Families, and particularly those living in rural and regional areas, will increasingly be adversely affected if the proposed tax increase goes ahead.”

Another cause of consternation is the fact that tax has been introduced before a change to the legislation has actually been made. This will mean car dealers will face a significant uncertainty and big administrative burden, particularly if the change is not made law.

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