Gas Guzzler Tax Australia 2025: Impact on High-Emission Cars

As Australia ramps up its efforts to meet ambitious climate targets, a new policy is grabbing headlines—the Gas Guzzler Tax. With 2025 marking a potential turning point, this tax is designed to discourage the purchase of high-emission vehicles and incentivise greener choices. Whether you’re a car enthusiast or simply looking to upgrade your ride, understanding how this tax works and its likely impacts is essential.

What is the Gas Guzzler Tax and Why Now?

The Gas Guzzler Tax is a levy proposed on new vehicles that exceed a set threshold for carbon dioxide (CO2) emissions per kilometre. While similar taxes have long existed in countries like the United States and parts of Europe, Australia has lagged behind—until now. In 2025, the Federal Government is considering the introduction of this tax as part of broader transport sector reforms, following the National Electric Vehicle Strategy (NEVS) and rising pressure to meet net zero by 2050.

• Thresholds: Early drafts suggest the tax would apply to vehicles emitting over 180g CO2/km, with higher rates for more polluting models.

• Scope: Light passenger vehicles and SUVs are in the crosshairs, but commercial utes and vans may see exemptions or delayed inclusion.

• Revenue use: Collected funds are slated for EV infrastructure and rebates for low-emission vehicles.

The move comes as Australia’s average new car emissions remain higher than the global average, with SUVs and large utes dominating sales charts. By targeting ‘gas guzzlers’, the government hopes to tip the scales towards hybrids, plug-in hybrids, and full electric vehicles.

How Will the Tax Affect Car Prices and Consumer Choices?

For buyers, the most immediate effect will be at the dealership. Cars and SUVs with high fuel consumption—think large V8s, turbocharged petrol SUVs, and older engine designs—are set to carry a price premium. Estimates for 2025 suggest:

• Entry-level penalty: Around $1,000 for models just above the emission threshold.

• Luxury/performance penalty: Up to $5,000 or more for powerful imports or large 4WDs.

• Exemptions: Many hybrids, plug-in hybrids, and EVs will remain unaffected, with potential rebates sweetening the deal.

Dealerships may offer discounts or include ‘dealer support’ to offset the tax temporarily, but over time, expect high-emission models to lose their value edge. For families or tradies eyeing a new dual-cab ute, the policy’s final draft will determine whether their vehicle of choice is taxed or spared—an ongoing point of industry lobbying.

Real-World Scenarios: Winners and Losers

Let’s break down what the Gas Guzzler Tax could mean for different buyers in 2025:

• The urban SUV buyer: Upgrading to a large petrol SUV like the Toyota LandCruiser? Expect a higher drive-away price. Considering a hybrid RAV4 or Mitsubishi Outlander PHEV instead could save thousands.

• The performance enthusiast: Iconic models like the Ford Mustang GT or Chevrolet Silverado V8 will be hit hardest. Some may reconsider, while others might opt for lower-emission turbocharged or hybrid sports cars.

• The eco-conscious driver: Hybrids and EVs, from the Tesla Model 3 to the BYD Atto 3, will become comparatively more affordable thanks to the absence of the tax and possible government rebates.

It’s not just buyers who’ll feel the shift. Manufacturers are already responding: Ford and Toyota are accelerating hybrid and EV launches, while the used car market for older V8s and diesels could see a brief uptick as buyers rush to avoid the new tax.

2025 Policy Watch: What’s Next?

With the federal government expected to finalise Gas Guzzler Tax legislation by late 2025, there’s still some uncertainty about the exact thresholds, exemptions, and enforcement. However, the direction is clear: Australia is aligning with global standards, and the era of the cheap, thirsty petrol SUV is drawing to a close.

• Expect further announcements about EV incentives and charging infrastructure in the next federal budget.

• State governments may introduce complementary taxes or rebates, as seen in Victoria’s Zero Emissions Vehicle Subsidy Scheme.

• Industry groups are lobbying for transitional support for local dealers and manufacturers.

For now, buyers planning a 2025 purchase should watch policy news closely and consider fuel efficiency in their shortlist. The difference could be thousands of dollars.