2008

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Amendment to be moved on behalf of the Government

(Circulated by the authority of the

Treasurer, the Hon Wayne Swan MP)

General outline and financial impact............................................................ 1

Chapter 1            Amendment.......................................................................... 3

Amendment for a fuel-efficient car limit under the luxury car tax

This amendment establishes a new luxury car tax threshold for fuel-efficient cars.

This amendment achieves this objective by introducing a fuel-efficient car limit into the luxury car tax law and applying it to cars with a fuel consumption not exceeding 7 litres per 100 kilometres.

The fuel-efficient car limit will be initially set at a threshold of $75,000 and indexed annually in the same manner as the luxury car tax threshold.  The limit will apply to cars with a fuel consumption not exceeding 7 litres per 100 kilometres as a combined rating under vehicle standards in force under section 7 of the Motor Vehicle Standards Act 1989.

Date of effect :  Royal Assent.

Financial impact :  This amendment to reduce the luxury car tax applicable to fuel-efficient cars will have the following financial implications:

Compliance cost impact :  Minimal, under the Motor Vehicle Standards Act 1989 new cars are required to display the combined fuel consumption rating prior to the time of sale.

Amendment

1.1                   This amendment to the Tax Laws Amendment (Luxury Car Tax) Bill 2008 has the objective of establishing a $75,000 fuel-efficient car limit for vehicles with a fuel consumption not exceeding 7 litres per 100 kilometres as a combined rating under vehicle standards in force under section 7 of the Motor Vehicle Standards Act 1989 to apply from the date of Royal Assent .

1.2                   For fuel-efficient cars, the fuel-efficient car limit replaces the luxury car tax threshold in a calculation of luxury car tax payable. 

1.3                   Fuel-efficient cars will be subject to the equivalent luxury car tax rate as other luxury cars.  Additionally, such cars will be subject to the car depreciation limit and goods and services input tax credits would be determined based upon the car limit (which is currently $57,180). 

1.4                   This amendment establishes a definition for cars subject to the fuel-efficient car limit.  That is, ‘if the car has a fuel consumption not exceeding 7 litres per 100 kilometres as a combined rating under vehicle standards in force under section 7 of the Motor Vehicle Standards Act 1989 , the luxury car tax threshold is the fuel-efficient car limit for the year in which the supply of the car occurred or the car was entered for home consumption’.  

1.5                   This amendment establishes that the fuel-efficient car limit for the 2008-09 financial year is $75,000. 

1.6                   Additionally this amendment ensures that ‘financial year’ has the meaning given by section 995-1 of the Income Tax Assessment Act 1997.

1.7                   This amendment also ensures that the fuel-efficient car limit is indexed annually by the motor vehicle purchase sub-group of the consumer price index, as is the general luxury car tax threshold.