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Friday, September 05, 2008

The strange case of the tax hike that exists, but doesn't

Curious, and arguably extra-legal

Intending buyers of luxury cars hoping to escape the tax hike will have to cool their heels.

Although the Senate rejected the budget measure yesterday, the government's decision to reintroduce it when the Senate next meets means that car dealers are under notice that the extra tax may still have to be paid.

The Age understands that the Tax Office will write to the dealers warning them that should the bill eventually pass they will be liable to pay the increased tax on every luxury car sold since July 1...

They will get no respite in the period between the Senate rejecting the bill and it eventually passing.

The Tax Office wrote to dealers in June warning them to prepare to pay the increased tax on every car sold from July 1 even though the measure's progress through the Senate was not assured.

Its follow-up letter will reiterate that advice.

Some dealers have been collecting the increased tax from their customers on the understanding that they will refund it when the Tax Office advises them that it is safe to do so.

Other dealers have been entering into sale contracts that allow them to collect the extra tax later should the bill be passed.

A third group of dealers has been absorbing the potential tax increase and will pay it out of their own resources if they are eventually required to.

So far none of the extra tax collected by the dealers has been paid to the Tax Office.

Industry estimates suggest that $15 million to $20 million would have been owing had the legislation been passed by the Senate.

The total is growing at the rate of $2 million a week.