Luxury Car Tax (LCT) could be cut for EVs under EU trade deal

The price of some European-made electric vehicles could dramatically reduce as the Australian Government considers cutting or abolishing the Luxury Car Tax (LCT).

Trade Minister Don Farrell has been in Europe this week to advance the Australia-EU trade pact and, as the Sydney Morning Herald [↗] reports, the EU has criticised the long-contested LCT – as no other imported luxury goods are subject to a similar levy.

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Farrell said, "one option is to lift the threshold for electric vehicles", an area where he believes they are "prepared to have some realistic discussions with the Europeans."

It’s worth noting the LCT price threshold for 'fuel efficient vehicles' (i.e, any vehicle with a claimed fuel consumption of less than 7.0L/100km combined) is already higher than for 'other vehicles.'

However, if the bilateral talks are successful and the LCT is completely abolished for European-made EVs, luxury EV buyers could save thousands of dollars (see table below).

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The catch…

Farrell has warned the EU that he will not agree on a trade deal unless it opens its market for better access to Australian beef, lamb and wine.

The Minister claims the Union’s trade offer on beef is not "ambitious", as local farmers criticise the EU for climate targets that limit agricultural export access.

The Sydney Morning Herald [↗] reports Australia has agreed to legally enforceable commitments on climate measures, gender equality, environmental issues, and labour standards, with the potential suspension of trade benefits if one party breaches international agreements and principles.

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If successful, it would support the federal government’s Electric Car Discount policy, which included waiving a five per cent import tax – mainly benefiting European-made EVs – and fringe benefits tax (FBT) exemption for work novated leases.

The government has also promised to introduce 'fuel efficiency standards' later this year – a landmark policy to boost EV supply and affordability.

Which European EVs could be more affordable under the deal?