Cars will need to be twice as green to avoid luxury tax

Vehicles that use 3.5 litres of fuel for every 100km will be eligible for a higher tax threshold. (Julian Smith/AAP PHOTOS)

Motorists will have to choose cars that use half as much fuel to avoid a vehicle tax in future after changes in a federal budget update. 

The Luxury Car Tax reforms, announced in the government's mid-year budget on Wednesday, will mean only vehicles that use 3.5 litres of fuel for every 100 kilometres will be eligible for a higher tax threshold.