How the super rich get a massive tax break under new car import laws, as ordinary buyers miss out
THE Federal Government has kicked another own goal, creating a new way for the wealthy to pay less tax on luxury cars while buyers on a budget miss out.
National
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CONTROVERSIAL changes to car import laws will deliver massive savings to the super rich — and put a dent in tax revenue thanks to a new loophole.
As the Federal Government asks Australians to tighten their belts, a News Corp Australia investigation has found fat cats will be able to save close to $200,000 on supercars and luxury sedans.
But the price of Australia’s most popular cars such as the Hyundai i30 hatchback would be a staggering $15,000 dearer (from $20,000 to $35,000) if imported privately.
The well heeled can save a whopping $172,000 if they import a new Lamborghini V12 privately under the proposed legislation due in 2018, while the savings on a top-of-the-range Porsche 911 Turbo S add up to more than $102,000, and Ferrari’s latest model can be had for $56,000 less than the local RRP, according to detailed News Corp Australia analysis.
The Federal Government rakes in approximately $450 million in Luxury Car Tax each year and has forecast increased revenue from the tax, which is 33 per cent on every dollar above $63,184.
But experts have warned it will be “open season for rorts” because it will be impossible to calculate the true transaction price of privately imported cars and, therefore, the government won’t be able to apply accurate tax charges.
News Corp Australia based its calculations on untampered prices.
But if unscrupulous dealers in the UK are happy to provide what the industry calls a “split invoice” (one for the car, and one for a sales broker’s “commission”) then the savings would be even greater because the five per cent import duty, 10 per cent GST and 33 per cent Luxury Car Tax are all based on a dealer invoice — rather than the real price paid for the car.
“Customs cannot and will not be able to determine the true transaction price of a car in another country,” said a high ranking car industry veteran, speaking on condition of anonymity.
“This is another tax dodge for the super-rich. The government has inadvertently provided a legitimate way for rich people to avoid paying more tax.”
Even if privately imported luxury cars are processed using honest invoices, the government will still take less import duty, GST and Luxury Car Tax.
The GST and LCT on a $795,000 Lamborghini bought from an Australian dealership is $226,517 ($57,086 and $169,431 respectively), but one imported privately at today’s exchange rate attracts $181,261 in GST and LCT ($43,652 and $137,609 respectively), a saving of $45,256.
However, if private importers were to provide a lower invoice price, the savings on import duty, GST and LCT would be even greater.
A spokesman for Paul Fletcher, the federal minister for infrastructure, who is overseeing the proposed changes, said: “The government is fully aware of the compliance issues involved in collecting duty on imported items, including vehicles. This is by no means unique to motor vehicles and there are well established practices to ensure that Customs collects the appropriate amount of duty.”
Meanwhile, buyers on a budget will be unlikely to import vehicles privately because the prices would be much dearer, once exchange rates, shipping and insurance costs are taken into account.
Another veteran of the automotive trade said: “Why the government has decided to stick the knife into car dealers who are traditionally supporters of the Liberal Party has everyone scratching their heads. How is saving thousands on a Ferrari going to help swinging voters who can’t afford one? This policy is going to hurt the working and middle classes who service and sell luxury cars, because the dealership won’t be able to keep everyone on once there is a downturn in sales of factory-imported vehicles”.
Savings for the super rich
Lamborghini Aventador V12
Australian RRP: $795,000
Private import price: $622,790
Saving: $172,210
Porsche 911 Turbo S
Australian RRP: $444,500
Private import price: $342,154
Saving: $102,346
Rolls-Royce Ghost V12
Australian RRP: $595,000
Private import price: $531,548
Saving: $63,452
Mercedes-Benz S600 Maybach
Australian RRP: $448,610
Private import price: $386,828
Saving: $61,782
Ferrari 458GTB
Australian RRP: $469,888
Private import price: $413,387
Saving: $56,501
Why the changes won’t help buyers on a budget
Hyundai i30
Australian RRP: $19,990
Private import price: $35,000
Increase: $15,000
Toyota Corolla
Australian RRP: $21,990
Private import price: $35,950
Increase: $13,960
UK prices sourced from manufacturer websites, then 20 per cent VAT removed. Currency converted to Australian dollars on 27 April 2016 using rates on XE.com, then add 5 per cent import duty, 10 per cent GST, and 33 per cent LCT on every dollar above $63,184. Plus $5000 for shipping and insurance. Hyundai and Toyota shipping and insurance costs were $2500, like-for-like models compared.
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