Why Australians keep buying huge utes and SUVs

Australians continue to buy huge vehicles like the Toyota HiLux and Ford Ranger.

Australians continue to buy huge vehicles like the Toyota HiLux and Ford Ranger. Photo: Toyota

Government policies and tax incentives still stoke sales for large vehicles like utes and SUVs, with total sales continuing to rise throughout the end of 2023 and the start of 2024.

Jack Thrower, a researcher for the Australia Institute, said the Morrison government’s ‘temporary full expensing’ to the ‘loss carry back’ tax offset encouraged an uptick in sales of large vehicles.

“Despite the end of those sorts of programs, you are still able to deduct from your taxes purchases of commercial vehicles,” he said.

“By that mechanism, you can avoid paying fringe benefits tax.”

The Albanese government’s proposed new car emission standards will change this when introduced, however, there are still several ways people are being encouraged to drive large vehicles.

Tax offsets

Two tax rules that have encouraged the sale of fuel-guzzling and inefficient vehicles, according to Thrower, are the temporary full expensing and loss carry back tax offsets.

The full expensing policy means a business buying motor vehicles can claim an immediate one-off tax-deductible expense, capped at $60,000 for smaller passenger vehicles, but uncapped for vehicles with a one-tonne payload.

The other – the loss carry back tax offset – allows a business to write off losses for purchasing a new vehicle to a previous year’s profit, resulting in reduced tax or a cash refund.

Another tax scheme, the instant asset write-off, was lowered from $60,000 to $20,000 in 2023 under the Labor government, but its removal triggered a rush to buy large vehicles.

Under the previous scheme, companies with up to $5 billion in turnover could claim up to $150,000 in assets as tax deductible, before being lowered to just $20,000 by June 2023.

In September, Assistant Treasurer Stephen Jones announced a one-year extension to the scheme.

“The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets,” he said.

“This is targeted, responsible support, to help Australia’s small businesses continue to grow.”

Sales rising

Despite the rush of people buying large cars before the Labor government ended certain tax breaks in the 2023 budget, sales haven’t let up.

Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber said utes accounted for 20.3 per cent of sales of new vehicles in February.

“Battery electric vehicles accounted for 9.6 per cent of sales in February, while one in five vehicles sold were powered by low-emissions technologies,” Weber said.

“Out of 21,327 utes sold in February, only one was an EV.”

The Ford Ranger was Australia’s highest-selling vehicle with 5353 sold in February, followed by 4403 Toyota HiLuxes and 3593 Tesla Model 3s.

utes Ford

The Ford Ranger continues to be Australia’s highest-selling vehicle in 2024. Photo: Ford

Every car in the top 10 vehicles sold in Australia throughout 2023 was either a ute or an SUV, in a year of record new car sales.

SUVs and light commercial vehicles – the category utes fall under – accounted for more than 78 per cent of all sales.

As Australia’s choice of cars grows larger on average, there has also been a push for larger car parks.

Thrower said the indirect costs of utes and SUVs include accommodating car parks, damage to roads and higher emissions during production.

“If we do make car spots bigger for these cars, then it’s essentially socialising these costs so that everyone has to pay the costs for these cars that only individuals have,” he said.

“If you have a larger car spot, then that either means you need more urban sprawl or more space for car parks. None of this is costless.”

Car park sizes have remained the same since 1993, but experts warned that the move could encourage even more people to get larger SUVs and utes.

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