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By David Leyonhjelm - posted Wednesday, 18 April 2018

Australians love their cars.  It’s not hard to see why; cars can be comfortable, convenient and liberating.

Yet our governments seem intent on making life for motorists more difficult.

First, there are the taxes on new cars.


There’s a 5 per cent import tariff, unless the car is made in a country with which Australia has a free trade deal.  So an import tariff of more than $1,500 is imposed on entry-level Commodores, which are now made in Germany.

Then there’s the luxury car tax, which imposes a 33 per cent tax on the value of new cars over $65,000.  This adds more than $6,000 to the price of a basic Landcruiser, and more than $120,000 on a top-of-the‑line BMW.

The GST of 10 per cent applies on top of that, after which comes state duties of around 3 per cent on top of the GST-inclusive value.  That’s quadruple taxation: a tax on a tax on a tax on a tax.

The tax penalty for buying a new car is a key reason why Australia has an old car fleet, with the average age of cars in Australia around 10 years.  This is a key contributor to our road toll, because older cars are not as safe in an accident, and it doesn’t help our pollution and emission levels either.

The high price of new cars in Australia is also the result of government-imposed restrictions on competition from used cars. 

Quotas on used car imports mean that only around 6,000 used cars are imported into Australia each year, compared to more than a million new cars. If these quotas were removed to allow unrestricted imports of used cars which are less than five years old and meet Australian standards, including right‑hand drive, it would only lead to the import of around 30,000 used cars each year. However, it would put significant downward pressure on new car prices.


Such a removal of quotas occurred in New Zealand with great success, and has been recommended by a succession of reviews including the Government’s own Competition Policy Review.  But the Coalition, intimidated by the manufacturers and their dealerships who sell new cars into Australia, is now threatening to make used car import arrangements even more restrictive.  This would further increase the price of cars in Australia.

After you’ve purchased a car, our governments continue to make life difficult for Australian motorists.

Before you’ve even pulled out of your driveway you’re hit with hundreds of dollars in registration fees, licence fees and surcharges on your insurance. Once driving, you’re hit with fuel tax of 40.9 cents a litre.  The unfairness of this is plain to see; those with a fuel efficient car pay less tax than those stuck with an old clunker despite using the same public roads. Those with an electric car pay nothing. 

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This article was first published in the Australian Financial Review.

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About the Author

David Leyonhjelm is a former Senator for the Liberal Democrats.

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