Australia and the European Union have finalized a new free trade agreement, promising cheaper European cars for Australian buyers while making minor adjustments to the Luxury Car Tax (LCT). The deal, announced today by Prime Minister Anthony Albanese, removes a five percent tariff on all vehicle imports from the EU, a move expected to lower prices across the board.
Luxury Car Tax Changes: A Limited Adjustment
The LCT will see a shift in thresholds for zero-emission vehicles (EVs). The new tax bracket will apply to cars priced above $120,000, a change from the previous $91,387 threshold for fuel-efficient vehicles (including EVs) taxed at 33 percent above that limit.
This adjustment has drawn mixed reactions. James Voortman, CEO of the Australian Automotive Dealer Association, pointed out that the higher threshold “only affects less than one percent of vehicles sold.” The EU negotiators reportedly pushed for a complete LCT removal, but Australia held firm on the tax’s continued existence.
Broader Trade Benefits: Beyond Cars
The deal extends beyond automotive trade. Ninety-eight percent of Australian exports to the EU will now be duty-free, with tariffs eliminated on most agricultural products, including beef and rice. Similarly, EU exports like wine and chocolate will enter Australia without tariffs.
The agreement also removes tariffs on almost all manufactured goods and mineral resources moving between the two regions. Negotiations began in 2018 and are now awaiting formal ratification by both Australian and European authorities.
The removal of the tariff on EU-sourced vehicles will improve affordability and increase competition in the Australian market.
The full details of the free trade agreement have yet to be released, but the government insists it will benefit Australian tradies and consumers by making European vehicles more accessible. The long-term impact on the Australian automotive market remains to be seen.
