Could removing taxes on new cars make our roads safer?

The Australian Automobile Association (AAA) has welcomed a proposed removal of tariffs on safer new vehicles, as expressed by Deputy Prime Minister and Minister for Infrastructure and Transport, Barnaby Joyce.

For car owners looking to pay a little more for foreign vehicles, you can currently expect to pay a five per cent import tax and the luxury car tax (LCT). The LCT is currently imposed at the rate of 33 per cent on the amount above the luxury car threshold (currently at $75,526 for fuel-efficient vehicles and $65,094 for all others).

These were originally brought in to protect Australia’s domestic car industry (Ford, Holden etc.), which have since ceased manufacturing in Australia. This poses the question of the relevance of these tariffs and taxes in 2018.

Yesterday Barnaby Joyce told ABC radio that scrapping the tariff was an “idea of merit”, and AAA’s CEO Michael Bradley agrees.

“Australia’s car manufacturing industry has closed and the tariffs and taxes used to protect it over recent decades can no longer be justified.

“Tariffs and taxes will add $5 billion to the price tag of new cars sold over the next four years and retard the fleet renewal needed if we are to make technologies such as Lane Keep Assist and Autonomous Emergency Braking commonplace.

“Rather than help Australian workers, this industry protection now hurts Australian motorists by driving up prices and locking them into older, more dangerous cars,” said Mr Bradley.

How will removing taxes and tariffs improve road safety?

According to AAA research, Australia’s passenger car fleet has an average age of 10 years, which is “old by global standards”. These existing tariffs and taxes have been labelled a major contributor to this. 

However, it becomes a matter of road safety when you consider a recent analysis of the 2015 vehicle fleet by AAA, which identified that cars build before 2000 accounted for 20 per cent, but were involved in 33 per cent of fatalities.

Further, these pre-2000 vehicle crash fatality rates are four times higher than those made post-2011. 

AAA research also found that we could save more than 1,300 lives over the next 20 years simply by reducing the average age of Australia’s vehicle fleet by one year.

It would also reduce road crashes by “5.4 per cent, deliver road trauma and emission reduction benefits worth $19.7 billion over 20 years and directly save the government $3.3 billion over the same period”.

Mr Bradley also stated that there is “no silver bullet that can solve Australia’s worsening road safety situation, but our research clearly indicates there are substantial benefits to be realised by initiatives to make newer, safer vehicles more affordable for Australians.

“We certainly welcome the comments from Deputy Prime Minister Joyce and stand ready to work through with him on the various policy measures needed to reduce Australia’s shocking rate of road crash fatalities,” said Mr Bradley.

Compare car loans in Australia