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Victorian State Budget – one hand giveth, the other taketh away

27 May 2019

The Victorian State Government’s 2019 Budget sees one hand giving, while the other takes away, as far as motorists and the automotive industry are concerned.

Licensed motor car traders have been given a concession on paying duty on service demonstrator vehicles. Meanwhile, motor vehicle duty has risen on ‘luxury’ vehicles, meaning Victorian car buyers will be paying more for some of the latest and safest vehicles. 

From 1 July this year, motor vehicle duty for used passenger vehicles valued above the luxury threshold will be charged $10.40 per $200 of market value, aligning used-car duty with that of new cars. The government says that this will “ensure consistent treatment of new and used cars regardless of value”.

In addition, the Victorian State Government has created two new ‘super-luxury’ thresholds, which will also be introduced from 1 July.

From that date, all passenger motor vehicles valued between $100,001 and $150,000 will be charged a motor vehicle duty of $14.00 per $200 of market value, and all passenger motor vehicles valued above $150,001 will be charged a duty of $18.00 per $200 of market value.  

Victorian Automobile Chamber of Commerce (VACC) CEO, Geoff Gwilym said that VACC supports the State Government’s big-picture thinking around tax issues, but said that the raising of motor vehicle duty is an unfortunate outcome for Victorian motorists and LMCTs in what is currently a distressed market.

“VACC recognises the government’s deeper understanding of wholistic tax issues. Treasurer Pallas has genuinely listened to industry around what it needs from future tax measures and we thank him for the concessions his government has delivered in the 2019 State Budget,” said Mr Gwilym.

“With the housing downturn strangling government revenue, something was always on the cards. We accept that. But we note that this is yet again a further impost on motorists and industry, which is unfortunate.”

While the lifting of motor vehicle duty is bad for most motorists, there is a silver lining for owners of all low-emission passenger cars – categorised as having carbon dioxide emissions of less than 120g/km – and for cars owned by primary producers who use those vehicles in the business of primary production.

If valued above the luxury threshold, these vehicles will be charged the lower rate of $8.40 per $200 of market value.

“While VACC never advocates for the lifting of motor vehicle duty rates, the automotive industry understands the government’s predicament. However, we will continue to monitor thresholds and seek opportunities to reduce red tape issues, which should lead to productivity gains,” said Mr Gwilym. 

Meanwhile, the Budget delivered some good news for LMCTs, with Treasurer Pallas announcing an exemption from motor vehicle duty on service demonstrator vehicles.  

“Service demonstrator vehicles are those lent by LMCTs to customers while their vehicle is being serviced or repaired, and these vehicles should never have attracted duty in the first place,” said Mr Gwilym. 

LMCTs carrying on the business of wholesale or retail dealings in motor vehicles will, from 1 July 2019, be entitled to a duty exemption when purchasing trading stock and/or demonstrator vehicles used predominantly for either or both of these purposes.

So, from 1 July, a LMCT will also be entitled to an exemption on service demonstrator vehicles satisfying similar criteria. 

“There is rarely a ‘perfect’ budget, but VACC thanks Treasurer Pallas and the Victorian State Government for addressing the area of service demonstrator vehicle exemptions, which was VACC’s number one lobbying activity for the members of its Victorian Automobile Dealers Association (VADA).

"On behalf of our dealer members, we look forward to addressing other areas in the Duties Act that are in need of modernisation,” said Mr Gwilym.

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