Let me slap your face and call it a ‘luxury'

Let me slap your face and call it a ‘luxury'


I DON’T know if you’ve ever strapped yourself into a Lotus Evora, or one of McLaren’s vehicles – say, the 720S, or something even more maniacal like the Senna – and given it a bit of a push. But let me tell you, when you do you’ll be feeling the effects of it for days afterwards.

If, like me, you are not built like, well, a McLaren F1 driver, you’ll have a stiff neck (especially if you’ve worn a helmet), sore shoulders and for good measure have given your core a good workout. In other words, it’s about as luxurious as a slap in the face.

But feeling like you’ve been worked over by one of Kim Kardashian’s bodyguards must be what our politicians believe passes for a cushy time, judging by the fact that the 720S, like any car valued at more than $66,000 or so, is subject to the federal government’s “luxury” car tax (LCT).

The muppets in Canberra have long conflated the concepts of “expensive” and “luxury”. Luxury and expensive are not always or even necessarily the same thing. And we can see in places other than the car market where this is true. A dilapidated three-bedroom fibro box that sells in Sydney for $1.85 million is expensive, sure, but it’s certainly not luxurious.

The Oxford Dictionary (just so I’m not relying on Wikipedia here) defines luxury as “a state of great comfort or elegance, especially when involving great expense”.

Let’s parse that sentence and take note of the words “comfort” and “especially”. The primary clause in the definition is that luxury is “a state of great comfort or elegance”. Let me refer you to the Evora, above.

However, it is qualified by a secondary clause, “especially when involving great expense”. “Especially” is an adverb used to single out one person, thing or situation above all others – so in this sentence it means that while great expense can denote luxury, expense is not a precondition to luxury. In other words, something that is expensive is not automatically and necessarily luxurious.

It’s like what I said about getting a sore neck in the McLaren – it’ll happen, especially if you’ve been wearing a helmet. It will still happen if you don’t wear a helmet. Wearing a helmet isn’t a precursor to getting a sore neck.

It happens that many luxurious items or experiences are expensive, but that’s because luxury is a desirable characteristic and people who have a lot of money often have little sense. They’ll pay through the nose for something with the “luxury” tag on it. But it’s clearly possible to pay a lot of money for something that is decidedly non-luxurious. Anyone who’s stumped up what it costs for a guided ascent of Mount Everest knows what I’m talking about.

'The LCT can’t accurately be described as an expensive car tax because $66k, frankly, buys you very little car at all these days.'

Cost is not a necessary precondition to an item or an experience being luxurious. Or, to put it another way, luxury has nothing to do with price. Which brings us back to the luxury car tax. It’s not a tax on luxury cars at all. It would be more honest to call it the “expensive car tax”, but since honesty is not a quality commonly associated with politics, that would appear unlikely to happen.

The problem here is that the LCT applies to cars with a value – including Goods and Services Tax and any customs duties – exceeding about $66,000 (or $75,000 if the car is deemed to be “fuel efficient”), so it really can’t accurately be described as an expensive car tax, either, because $66k, frankly, buys you very little car at all these days. The threshold needs to be reviewed.

LCT is calculated at 33 per cent of the value of the car above the LCT threshold. So a car with a GST-inclusive price tag of, say $100,000 attracts LCT of about $11,333 – that is, 33 per cent of the $34,000 by which it exceeds the threshold of roughly $66,000. Then they add that tax to the price so your $100,000 car gets inflated to $111,333 (plus other dealer-related costs).

So back to the McLaren 720S. It’ll shake your fillings out and smack you around like an MMA cage fighter. And of the $670,000 drive-away cost, about $140,000 is the “luxury” car tax. That’s another kind of slap in the face.