Australian taxpayers lost out on a quarter of a billion dollars in revenue in 2023 thanks to a generous tax loophole for “big, dumb” American-style utes, a report says.
Large utes such as those made by Chevrolet and Ram are being subsidised as they are exempt from the Luxury Car Tax while contributing to higher carbon emissions, road damage and serious safety concerns, according to a report by think tank the Australia Institute.
The “loophole” cost the Australian public $250 million in foregone revenue in 2023 alone, while other imported cars valued above $81,000 continue to be subject to the tax.
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The exemption applies to any vehicle that can carry twice the weight in payload that it can carry in people, regardless of what it is used for.
“The Australian public is subsidising big, dumb utes by hundreds of millions of dollars each year,” Australia Institute research director Rod Campbell said.
“These vehicles are damaging roads, reducing safety and increasing emissions, yet they are given a massive tax break.”
The vehicles, categorised as “full-size 4X4 utes”, are one of the fastest-growing market segments, increasing by 21.4 per cent in 2023.
The report said the tax breaks are leading to huge utes being more economically attractive than other similarly priced cars.
It compared a luxury hybrid sedan worth $133,000 and a luxury pick-up truck priced at $138,000 before on-road costs, and found that after tax the hybrid ended up costing $149,000, or $11,000 more than the ute, which was exempt.
“Even if a purchaser chose an electric alternative, making it eligible for the higher fuel efficiency threshold, the tax would still likely make the ute cheaper,” the report said.
Pricier vehicles magnified the impact of the tax exemption, with one ute avoiding more than $50,000 in tax.
Removing the luxury car tax exemption would not affect most ute drivers, including most tradies who use non-luxury utes which sit below the tax threshold, and instead would target those buying them for personal use, Campbell said.
“Economics 101 says that governments should tax things they want less of, and subsidise things they want more of,” he said.
“Big utes impose considerable costs on society, whether it’s safety concerns or the impact on our roads and climate.”