Anne McEwen (SA, Australian Labor Party) Share this | Hansard source

The incorporated speech read as follows—

The Tax Laws Amendment (Luxury Car Tax) Bill 2008 and the three subsequent pieces of legislation will increase the luxury car tax from 25 per cent to 33 per cent and is part of Labor’s first Budget.

This increase is part of the government’s package of measures to enhance fairness in the tax system. The government believes that Australians who can afford luxury vehicles have the capacity to contribute to revenue at a higher rate than other car buyers. Additionally it is expected that this measure will contribute to the necessary task of ensuring that the budget relieves pressure on inflation. The measure is expected to raise $555 million in additional revenue over the forward estimates.

Since 1979, successive Australian governments have imposed an additional tax on luxury vehicles. The luxury car tax was introduced on 1 July 2000 when the GST was introduced and the wholesale sales tax abolished. The tax is generally payable when a car is sold or imported at the retail level. It is additional to any goods and services tax (GST) payable. Luxury car tax applies to cars whose price, including GST, exceeds the luxury car tax threshold, which is currently $57,123.

The formula used to calculate the value of the luxury car tax is:

the luxury car tax threshold is indexed using the motor vehicle purchase component of the consumer price index which includes both imported and domestically produced vehicle sales. The threshold also represents the car limit. The car limit is used in a calculation to limit the maximum amount of depreciation deductions allowed on the car under the income tax law for the relevant financial year.

The luxury car tax applies to both domestically produced and imported vehicles, though certain types of cars are exempt from the tax. This includes most commercial vehicles, most second hand cars, motor homes, campervans, and prescribed emergency vehicles. We are not changing these arrangements.

There are existing exemptions in the law to ensure that GST and luxury car tax do not apply to modifications for transporting the disabled. A car which is specially fitted out for transporting a person with a disability, seated in a wheelchair, is excluded from the definition of ‘luxury car’ and is not subject to luxury car tax, provided the car is not GST-free under GST law.

This concession is available to any person, including a carer that modifies a car they purchase for a person with a disability, seated in a wheelchair, before the time of taxable supply by the dealer—that is, before the sale of the car. GST and luxury car tax do not apply to the value of any modifications made to a car solely for the purpose of adapting the car for driving by, or transporting, a person with a disability. Again, this concession is available to any person, including a carer that purchases a car and modifies it accordingly. However, if the value of the unmodified car exceeds the Luxury Car Tax threshold then the value of the unmodified car will be subject to the tax.

A disabled veteran or eligible person with a disability can purchase a car GST-free up to a value of the luxury car tax threshold. GST and luxury car tax is payable beyond that amount, which is currently $57,123. This treatment would apply to a vehicle that is not modified but has been purchased to meet the needs of a disabled person because of the vehicle’s size or height. To qualify for this concession the disabled veteran must intend to use the car for personal transportation for two years or until the car has travelled 40,000 kilometres. To qualify for this concession the eligible person with a disability must intend to use the car for their personal transportation to travel to and from gainful employment for two years or until the car has travelled 40,000 kilometres.

Where the cost of a conversion pack is included in the cost of the car, when the value of the car exceeds $57,123—inclusive of the conversion pack—then LCT would normally be payable on the amount above the threshold. However, if the conversion pack is used to make modifications before the taxable supply then the cost of the modifications, including the cost of the conversion pack, may not be subject to LCT. If the conversion pack is purchased after the car is purchased from the dealer and then used to convert the car, the conversion pack is LCT and GST free.

There is no evidence that the luxury car tax will increase car prices more generally. Nor will it disadvantage people with disabilities. The tax laws already provide exemptions for people with a disability from the luxury car tax. The Opposition claim that this legislation will disadvantage those living with a disability, a claim which has no substance. Treasury has consulted with disability groups to ensure they are not adversely impacted by the measure.

It is estimated that around ten per cent or around 100,000 of all new car sales made in Australia in 2007 were subject to luxury car tax. Of the top 20 selling cars in 2007, which covers more than 50 per cent of the car market, less than four per cent of those sold are subject to luxury car tax. At the lower end, the increase is in the hundreds, not thousands, of dollars. The increase in the luxury car tax for the lowest cost Toyota Prado models are $39 and $98. For the Ford Territory Ghia, the increase is $496.

Labor has developed a Budget that will deliver to working families. A budget that protects Australia at a time of global economic instability. A Budget that invests in our nation’s future. A Budget that has been attacked by the Coalition since day one.

We have come into office in difficult economic circumstances. Not only have we inherited a mess from the high-spending Howard Government, we are in a time of global financial turbulence.

The global credit crunch and the global oil price shock have impacted on confidence right around the world. It has pushed up borrowing costs for households and businesses around the world. Global share markets have fallen by an average of around 20 per cent in developed economies since the global turmoil began. Stock markets around the world have been affected by the global financial crisis and a slowing world economy. And consumer confidence across the OECD economies has fallen to its lowest point in almost 30 years.

Fighting inflation is the central challenge facing our economy today. The Rudd Government has recognised this and unlike the previous Government, Labor is addressing the challenge. We have reigned in Government spending after the Howard Government’s spending sprees. When Labor came into Government, Government spending was running at between four and five per cent growth on the part of the Coalition. We have reduced that to just on one per cent.

If we had continued this irresponsible spending, at the same growth level that the Howard Government had it running at for the last several years, it would have cost taxpayers an extra $23 billion worth of outlays. Another $23 billion of taxpayers’ money would have been blown away. Those opposite spent recklessly with the money of the Australian public and the damage that recklessness has caused to this economy is still evident today.

Labor has taken a very different approach to the Howard Government, instead of going on spending sprees, we have focussed on savings. We generated $33 billion in savings to ensure that our new spending initiatives of $24.7 billion were met by savings.

The Budget provides for Australians and plans for the future, something the Howard Government never did. The budget contained a $40 billion investment in Australia’s future to build new and improved roads, hospitals and schools. The budget is the first step towards a new, more modern Australia, with a first-class economic and social infrastructure. By making Australia’s finances more sustainable, we can now start investing in the schools, hospitals, roads, rail and communication projects that were neglected by our predecessors for more than a decade. This has only been made possible because we have had the courage to take the tough decisions that may cause some pain, but in the longer term will make Australia stronger.

Productivity growth has declined sharply in recent years. From average annual growth of 3.3 per cent during the productivity cycle of the mid-1990s, to just 1.1 per cent in the current cycle. That productivity slowdown reflects the long-term neglect of investing in the drivers of productivity – our workforce and our infrastructure.

On Monday the Prime Minister Kevin Rudd outlined Labor’s plan to turn this around at the AI Group Annual National Dinner. “The Government is committed to building our long-term prosperity by investing in five key platforms for future productivity growth – education, infrastructure, innovation, business deregulation and taxation reform.” This is all part of Labor’s commitment to nation building. This Government is committed to implementing the single largest infrastructure program in the history of the Commonwealth, a program of some $76 billion.

We have already begun investing in infrastructure through the establishment of Infrastructure Australia. This organisation will help drive investment in critical national infrastructure such as road, rail, ports and high speed broadband.

We have invested a significant amount into communications infrastructure, committing up to $4.7 billion for the new broadband network to reach 98% of Australian homes and businesses.

Other planned investments into infrastructure include $26 billion in roads and rail infrastructure through 2008-09 to the end of AusLink II. In addition, the Labor Government will invest $20 billion through the Building Australia Fund in transport, energy and water priorities.

On innovation, the Prime Minister explained that the Government is building a 21^st century innovation-driven industry policy—not the old industry policy based on protection and resisting change, but the 21^st century innovation policy that embraces change, productivity and global markets.

We have developed a $55 billion Working Families Support Package. Part of this package is lifting the Child Care Tax Rebate. Labor proposes to increase child care assistance by lifting the rebate from 30 per cent to 50 per cent of out-of-pocket costs and increasing the annual cap frm $4354 to $7500 per child. We understand that the cost of childcare isn’t the only obstacle faced by parents, availability is a big problem. For this reason, the Government, over the long term, has committed to ensure 260 child care centres are built in priority areas.

Another important part of the Working Families Support Package in respect to raising children, is the $4.4 billion education tax refund. This refund will mean that parents who are entitled to family tax benefit A or whose children receive the youth allowance, can claim a 50% tax refund of up to $750 in education expenses for each child in primary school, that’s a refund of up to $375 per year, and up to $1500 in expenses for every child in secondary schools, a refund of up to $750 per year.

Working families as well as singles will benefit from the changes to the Medicare levy surcharge thresholds. While the cost of living and incomes have changed over the last 11 years, the income thresholds haven’t. This has resulted in people on average wages by today’s standards, becoming liable for the surcharge. The Government are increasing the thresholds to bring them in line with today’s wages so that the Medicare levy surcharge is only placed on higher income earners. From 1 July 2008, singles with incomes up to $100 000 and families with incomes up to $150 000 will no longer have to pay the surcharge. These are both increases of $50 000 from the current thresholds. The Government is increasing the thresholds to bring them in line with today’s wages so that the Medicare levy surcharge is only placed on higher income earners.

We are creating a fairer, more balanced tax system; this bill is part of that.

The Government’s tax reforms outlined in the Budget will provide 46.7 billion of personal income tax cuts over the next four years. For a taxpayer earning $50 000 a year the tax cuts will deliver an additional $19.23 per week from 1 July 2008. This will increase to $25 a week from 1 July 2009 and $33.65 a week from 1 July 2010. When fully implemented they amount to almost a 20 per cent reduction in their tax bill. These tax cuts will provide significant relief for people battling the rising cost of living, but the Coalition are standing in the way.

To deliver all these fantastic initiatives, we need our budget passed in full. The Liberals are intent on opposing key budget measures which would blow a $6.2 billion hole in that surplus we need. Along with the Medicare Surcharge Levy, the Luxury Car Tax is one of those key budget measures being blocked.

By blowing such a gaping whole in our Budget surplus, the Opposition is limiting our ability to put downward pressure on inflation. Having a strong Budget surplus is an important buffer against international economic uncertainty.

Those opposite always talk about being economically responsible, but they continually show us otherwise. Blocking our budget is the pinnacle of economic irresponsibility. No responsible economic manager would choose to increase uncertainty at home at a time when we face significant uncertainties from abroad. They need to ensure that the Government has got the ability to put downward pressure on interest rates, and to help the Reserve Bank do its job.

The reality is that the Coalition wants higher taxes for working families and lower taxes for luxury cars. They want to ensure that the rich can get luxury cars cheaper while those on lower incomes struggle to fill their cars with petrol. Those are the twisted priorities of the Opposition that have hurt Australian families for over a decade.

The Government wants to deliver to deliver its budget in full so that it can roll out its $55 billion Working Families Support Package to support Australians and provide a significant surplus to fight inflation. It’s time that the Coalition let us do it.