Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Hansard source

It is disappointing that the Australian car industry now faces an even bleaker future as a result of that request for an amendment that has just been carried. But to try to relieve the burden on the Australian car industry the opposition believes that the indexation of the threshold should be put on a more realistic footing. A realistic footing would be to ensure that the motor vehicle luxury car tax threshold would be indexed according to normal consumer price index movements, as opposed to the CPIMV.

I should have indicated, Madam Temporary Chairman, that we are withdrawing opposition request (4) because that clearly is no longer tenable but we have another version which is now request (1) on sheet 5601, and that is the request that I am seeking to move now before the committee—my apologies for not clearing that up earlier. I move:

That the House of Representatives be requested to make the following amendment:

(1)   Schedule 1, page 3 (after line 27), at the end of the Schedule, add:

4  Subsection 25-1(3)

Repeal the subsection, substitute:

        (3)    The luxury car tax threshold for the 2008-09 financial year is $57,180.

        (4)    The threshold referred to in subsection (3) is indexed for each year of tax after the year of tax commencing on 1 July 2008 in accordance with the CPI indexation method provided for by Subdivision 960-M of the *ITAA 1997, calculated using the index number referred to in subsection 960-280(1) of that Act.

What has happened is that since this luxury car tax was introduced, under the Hawke-Keating regime, and then it was continued, it has been indexed by a mechanism called the CPIMV, or the consumer price index related to motor vehicles. This unfortunately did not take into account the actual increase in the cost of cars, and it is interesting that the report by the Senate economics committee showed that there has been substantial bracket creep. When the luxury car tax concept was first considered, it covered about 2.5 per cent of motor vehicles; today, it covers about 12 per cent, five times as many motor vehicles as when it started. We note, for example, that a Toyota Prado, now $66,874; a Toyota Tarago, at $64,887; a Mitsubishi Pajero, at $64,447; a Ford Territory, at $62,657; and a Nissan Patrol, at $62,116 all now fall into the luxury car tax bracket, whereas if there had been proper indexation that would not have occurred.

What we are suggesting to the Senate, to ensure that bracket creep no longer has this sort of impact, is that we provide a mechanism for indexation which will ensure that there is some equity. Indeed, the Senate economics committee received evidence that, if there were not going to be proper indexation, ‘up to half of all motor vehicles sold in Australia will be subject to the luxury car tax by 2030’. Now, I would have thought—even with Senator Doug Cameron’s warped view of the world—that that would be seen as quite extreme and therefore we clearly need a mechanism which will ensure that 50 per cent of motor vehicles sold in the Australian marketplace are not categorised as luxury vehicles by the year 2030. The time to fix this is now, and that is why we are putting this proposal to the Senate this evening. I understand it is a proposal that is being opposed by the government, which once again confirms they are not about fairness, they are not about equity; they are concerned about a tax grab, an unconscionable tax grab, where people will now be paying 43 per cent tax on any motor vehicle purchased.

Before the dinner break, I was canvassing opposition request for amendment 1 on sheet 5601 to add an item to deal with the indexation of thresholds. The luxury car tax concept, when it was first considered, covered some 2.5 per cent of motor vehicles sold in Australia. Today it covers about five times that number, around the 11 per cent to 12 per cent mark. Industry indications are that, unless we have a proper indexation mechanism by the year 2030, 50 per cent of motor vehicles sold in Australia will be considered luxury cars. Clearly the current indexation methodology does not work and is unsatisfactory.

As a result, we as an opposition are suggesting to the government and to independent senators that consideration be given to indexing this threshold on the basis of the consumer price index as opposed to some undoubtedly spectacular formula that somebody thought of, which is the consumer price index for motor vehicles—the CPIMV. The Senate committee report canvasses these matters quite well. If you have a look at the cost of, say, a ‘family 6’—a very popular type of Australian motor vehicle—you will see that it clearly has exceeded the CPIMV. If you have a look at average weekly earnings, you will see they have considerably exceeded the CPIMV. The CPI has considerably exceeded the CPIMV. The CPIMV does not reflect the increase in prices actually paid for cars and that is why we now have a situation where it covers five times as many cars as when it was first considered. So we believe that the luxury car tax threshold should be adjusted on an annual basis in line with the consumer price index.

Senator Fielding was right in his speech in the second reading debate the first time around that this is nothing but a tax grab. If the government wanted to dress this up with even a fig leaf of responsible taxation, they would introduce a proper indexation mechanism. That is what we are suggesting.