Australian motorists being a European-made EV big winners as luxury car tax threshold raised to $120,000

Australian motorists in the market for an electric BMW are the biggest winners of a free-trade deal with the European Union that will see the luxury car tax threshold rise to $120,000.

After eight years of negotiations, Australia and the EU have reached a bilateral trade deal that will cut taxes on European-built electric cars during a global fuel crisis.

The deal will see the luxury car tax threshold for European-made EVs rise from $91,387 to $120,000 but only for zero-emission models and not petrol-electric hybrids.

This will spare EV buyers of more BMWs from having to pay the 33 per cent luxury car tax if it’s below this new threshold, saving them thousands of dollars.

The big winners are prospective buyers of a Hungarian-made battery-electric BMW iX3 priced from $114,000, who will be exempt now from a $7462 tax.

But the German-made plug-in electric hybrid BMW 330e, priced at $97,400, doesn’t qualify despite its fuel consumption of 2.1 litres for every 100km falling within the 3.5 litre threshold for fuel efficient cars under Australian luxury tax rules.

That means new buyers of this luxury sedan will still have to pay $1984 to the Federal Government.

The $120,000 threshold for fuel-efficient cars brings EU-made electric and hybrid models into line with vehicles made in nations that also have free-trade deals with Australia, including China, Japan, South Korea and Thailand.

Federal Chamber of Automotive chief executive Tony Weber welcomed the EU free trade deal but said the luxury car tax needed to be scrapped entirely because it was an obstacle to encouraging more motorists to drive an EV.

“The change to the luxury car tax is incremental and leaves in place an outdated measure that no longer reflects the structure of the Australian automotive market,” he said.

“Luxury car taxes were first introduced in Australia nearly 40 years ago to protect a domestic manufacturing industry which no longer exists.

“It serves no clear purpose other than raising revenue and continues to impose unnecessary costs on consumers.”

In February, before the US strikes on Iran sparked a global fuel shortage that pushed unleaded prices above $2.50, battery-electric cars already had a record 11.8 per cent record monthly market share.

Employers providing an EV under the luxury car tax threshold of $91,387 are exempt from having to pay fringe benefits tax.

A driver paying off this car under a novated lease can also claim running costs, financing and registration as a tax deduction.