Changes to Luxury Car Tax for 2026 will hit Toyota Kluger, Mazda CX-90, Audi Q5, and Australian family SUV buyers hardest

Lukas Foyle

Contributor

Tighter restrictions within Luxury Car Tax will increase the purchase price of large family cars in Australia

Amid whispers of a long-awaited Luxury Car Tax (LCT) capitulation, the Australian Government has changed the definition of ‘fuel efficient vehicles’, with significantly heightened expectations for financial year 2025-2026.

Luxury Car Tax applies a 33 percent tax on every dollar over a set threshold. Two thresholds are currently in place: $91,387 for fuel-efficient vehicles and $80,567 for other vehicles. Note that LCT applies before on-road costs.

Financial year 2025-2026 begins on July 1, and many punters expected a year-on-year buffer to be applied to both categories of LCT — but this hasn’t happened. FY25-26 will retain the same $91,387 and $80,567 price ceilings despite tighter restrictions.

In addition, new vehicles will need to meet a combined fuel economy of 3.5L/100km to be considered ‘fuel efficient’ — a tall order for family cars such as the Toyota Kluger and Mazda CX-90 D50e, which met the previous benchmark of 7L/100km.

As a result, many Australian families looking to purchase a new car — particularly those looking in the seven-seat SUV segment — will likely be paying even more. The table below shows how some popular models will be affected.

Make / Model	Current price (before on-road costs plus LCT)	New price (before on-road costs plus LCT)	Price increase due to LCT change
Audi Q5 40 TDI Quattro Sport MHEV	$87,000	$89,123	$2,123
Toyota Kluger Grande Hybrid AWD	$84,080	$85,239	$1,159
Mazda CX-90 D50e Azami Takumi	$92,101	$95,907	$3,806

Luxury Car Tax was introduced in 1999 in an effort to thwart sales of imported cars, in-turn protecting Australian brands. The two local heavyweights, Ford Australia and General Motors Holden, closed in 2016 and 2017 respectively, yet the LCT still remains…for now.

A report published in The Australian claims that “a source close to the Prime Minister” has revealed that the Federal Government is “prepared to dump the [LCT] tax” in trade for “better access for Australia’s agricultural exports”.

As pressure from European trading partners grows exponentially, an abolishment of LCT seems more likely now than ever before. Chasing Cars has been investigating updates to the LCT very closely. Our exclusive report can be viewed here.