Australia is considering changes to its luxury car tax as part of negotiations aimed at securing a long-awaited free trade agreement with the European Union.
The tax has emerged as one of the remaining obstacles in the talks, with European officials arguing the measure unfairly targets imported vehicles produced by European manufacturers.
Under Australia’s current system, vehicles priced above approximately $80,000 attract a luxury car tax of 33 per cent.
Sources familiar with the negotiations say the federal government is examining the possibility of raising that threshold to at least $100,000 as part of a compromise that could help finalise the trade deal.
Such a change would benefit premium European carmakers including BMW and Mercedes-Benz, whose vehicles are frequently affected by the tax.
Treasurer Jim Chalmers confirmed the government had indicated a willingness to include luxury car tax thresholds in discussions with European negotiators.
“We are trying to finalise that EU free trade deal as soon as we can,” Chalmers said.
He also acknowledged the role of Trade Minister Don Farrell and Foreign Affairs Minister Penny Wong in advancing negotiations between Canberra and Brussels.
Australia and the European Union have been negotiating a comprehensive trade agreement for several years, seeking to expand access to each other’s markets across industries including agriculture, manufacturing and services.
European governments have long criticised Australia’s luxury car tax as a trade barrier that disproportionately affects imported vehicles.
The potential adjustment to the tax threshold is being considered as part of broader negotiations aimed at unlocking the agreement.
Diplomatic sources say momentum in the talks has increased in recent weeks and a visit to Australia by European Commission President Ursula von der Leyen could be announced within days.
If finalised, the trade deal would be one of Australia’s largest bilateral economic agreements, covering a market of more than 440 million people across the European Union.
