Which electric cars are exempt from the Luxury Car Tax?

The Luxury Car Tax (LCT) is a compulsory levy that raises the price of many new vehicles in Australia, but with the right choice, electric vehicle buyers can evade it.

For now – and likely for a while to come – electric cars are generally more expensive to buy than an equivalent petrol- or diesel-powered car.

After all, it’s one key perceived barrier to adoption, even though cheaper ownership costs over time will eventually recoup and surpass that price premium as you drive further.

Therefore, the LCT adds another unavoidable cost layer and can exacerbate this price hurdle – an issue that industry advocates have long called for its abolishment to no avail.

With the threshold lifted again for the latest 2023-24 financial year, which EVs dodge the LCT?

JUMP AHEAD

• 🤷 What is the LCT?
• 👀 Which EVs are newly exempt?
• 💵 Full list: Every EV exempt from LCT
• 📉 Will the LCT ever go away? Increasing thresholds year-by-year

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🤷 Firstly, what is the LCT?

The Luxury Car Tax is a compulsory fee to pay on a vehicle that is sold or imported, two years old or less, and above a price threshold set by the Australian Tax Office (ATO).

It is a 33 per cent tax calculated on the amount over the threshold.

EVs have some more wiggle room – being classed under a higher fuel-efficient vehicle threshold – but that also applies to any petrol- or diesel-engined model with a claimed combined fuel consumption of 7.0L/100km or less.

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To determine whether a vehicle is subject to LCT, refer to the vehicle manufacturer’s suggested retail price (MSRP). This includes the ​​Goods and Services Tax (GST), any options or modifications fitted (except modifications for people with a disability), and dealer delivery charges at the time of purchase.

However, the ATO does not account for mandatory ‘on-road costs’, including stamp duty, registration and compulsory third-party insurance (CTP).

Most car brands (except for Tesla) include the LCT in the listed retail price before on-road costs, usually with an asterisk point to say as much.

Additionally, all commercial vehicles designed mainly for carrying goods are exempt from the LCT, regardless of price.

After all, they're clearly not luxury cars – a point Toyota has railed against many times regarding its large SUVs.

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👀 Which EVs are newly exempt from the LCT?

In the latest 2023-24 financial year (effective between July 1, 2023 to June 30, 2024), the LCT threshold for fuel-efficient vehicles has been lifted to $89,332.

The following electric car models now fall under the threshold.

• Tesla Model 3 Performance
• Hyundai Ioniq 5 Epiq AWD
• Hyundai Ioniq 6 Epiq AWD
• Kia EV6 GT-Line AWD
• Volvo C40 Twin Motor Ultimate
• Lexus UX300e Sports Luxury
• Mercedes-Benz EQB 250

Tesla Model Y Long Range buyers looking to add options, such as exterior colour (white is the only standard no-cost colour), a white interior or larger wheels can also now do so without incurring the LCT.

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💵 Every LCT exempt EV model in the 2023-24 financial year

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Note: LCT applies to the Ford Mustang Mach-E, but not E-Transit since it's a commercial vehicle

📉 Will the LCT ever go away for EVs?

Industry lobbyists continue to call for the abolishment of the LCT, particularly for electric vehicles to lower the price tag barrier. But, it remains off the agenda for the current sitting Australian Government.

Lifting or removing the threshold for European-made EVs was mooted again amid recent free trade agreement negotiations with the European Union – which has long criticised the LCT – but, despite multiple glimpses, it hasn’t resulted in any policy change yet.

However, the set LCT threshold has been steadily rising higher in the past few financial years as a growing number of Australians buy EVs.

For now, the only silver lining is: more models are becoming LCT exempt and those above the threshold are less impacted (since the LCT is calculated on the amount above the threshold).

LCT threshold by the years

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