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What is luxury car tax?

The Luxury Car Tax increased for the next financial year. Find out LCT is and whether it applies to your car.

Luxury car tax (LCT) is a tax charged on imported vehicles valued over a threshold set by the Australian Taxation Office. There are 2 thresholds: one for standard vehicles and another designed to encourage the uptake of fuel-efficient cars.

Originally, the luxury car tax was intended to support the Australian automotive industry by encouraging people to purchase locally-made cars. With large-scale domestic car manufacturing gone, many Aussies are now critical of the LCT.

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What is the luxury car tax?

The luxury car tax is a tax collected by the Australian Taxation Office on imported vehicles valued above a set price threshold. The tax is typically payable by businesses that purchase or import luxury cars as well as on non-business entities that import luxury cars. That outlay is then included in the price of the vehicle and passed on to a buyer.

The LCT is a tax of 33% applied to the remaining retail price of a car above the LCT threshold (including GST and other dealer fees and accessories, but excluding stamp duty, CTP, servicing packages and warranty extensions). However, this threshold is reviewed for every financial year and other conditions will determine whether a car qualifies for LCT.

How does the luxury car tax work?

The LCT is a tax on the GST-inclusive total value of a car that is over the threshold set by the Australian Taxation Office.

As of 2022, it's only payable at a 33% rate on the value of the vehicle that exceeds the LCT threshold.

Because the LCT thresholds have changed over the years, here's a breakdown of the different financial year value bands.

Australian uxury car tax threshold

Financial year
Fuel-efficient models
Other vehicles
2022–2023$84,916$71,849
2021–2022$79,659$69,152
2020-2021$77,565$68,740
2019-2020$75,526$67,525
2018-2019$75,526$66,331
2017-2018$75,526$65,094
2016-2017$75,526$64,132
2015-2016$75,375$63,184
2014-2015$75,375$61,884
2013-2014$75,375$60,316
2012-2013$75,375$59,133
2011-2012$75,375$57,466
2010-2011$75,375$57,466
2009-2010$75,000$57,180

When calculating the value of a car for LCT purposes, the value of parts, accessories or attachments supplied with the car will be taken into account. Though the cost of the LCT is typically borne by businesses, in some cases, they can pass this cost on to the final consumer.

What qualifies as an environmentally friendly car? The Australian Taxation Office defines an environmentally friendly vehicle as one that uses less than 7 litres of fuel per 100km on the combined cycle.

How does the luxury car tax apply to electric vehicles?

When it comes to electric vehicles, such as Tesla models, the luxury car tax bracket is the same as for fuel-efficient cars. Currently, many people deem this unfair as it disincentivises people from purchasing zero-emission vehicles. The electric vehicle industry has been calling for an abolition of the LCT for electric cars for some time.

For those currently in the market for an EV, it's worth noting the following vehicles fall under the current $79,659 threshold, meaning they are exempt from LCT and it does not apply:

However, luxury car tax does apply if you're considering any of the following vehicles that are not exempt under the current threshold:

  • Audi e-tron
  • Audi e-tron GT
  • BMW i4
  • BMW iX
  • BMW iX3
  • Jaguar I-PACE
  • Lexus UX 300e (Sports Luxury)
  • Mercedes-Benz EQC
  • Porsche Taycan
  • Tesla Model 3 (Performance)
  • Tesla Model S
  • Tesla Model X
  • Volvo C40 Recharge (Twin Motor)
  • Volvo XC40 Recharge (Twin Motor)

How to register for the luxury car tax

If you run a business that sells cars to consumers, you will need to have an Australian Business Number (ABN) and be registered for GST. You will need to satisfy both these requirements before registering for the LCT.

You can apply for an LCT business account in the following ways:

  • Online at the Australian Business Register when you apply for an ABN
  • By completing and submitting a hard-copy form
  • Over the phone
  • Through your registered tax agent or BAS agent

Applying for this type of account will mean that the 1E and 1F labels appear on your activity statement.

When does the luxury car tax apply?

When the LCT needs to be charged can be a confusing issue for some business owners as well as for prospective buyers. Generally speaking, if you import or sell a car valued above the LCT threshold, you are liable for LCT. However, there are certain instances when the issue of LCT becomes a little more complicated.

Cases where luxury car tax does apply include the following:

  • When selling a car to an associate or a GST group member. Under these particular circumstances, the car is subject to LCT.
  • When accessories, modifications and treatments are added. If any of these are made before the car is delivered to the customer or as part of an arrangement with the car supplier before the car is delivered, the cost will be included when calculating the LCT value of a car.
  • When the car is purchased by someone with a disability. If a person with a disability purchases a car valued above the LCT threshold, LCT will apply.
  • When the car is purchased by an endorsed public institution. Endorsed public institutions, such as museums, galleries or libraries, purchasing a car locally will have to pay LCT if applicable.
  • When you defer your LCT payment. There are certain circumstances under which you can quote your ABN at the time of purchasing or importing a luxury car to defer paying LCT until you have sold or imported the car at the retail level. You'll need to be registered for GST and have an ABN, plus you will need to either plan to hold the car for trading stock, to carry out research and development work for the car manufacturer or to export the car where it is GST-free.

However, instances when luxury car tax does not apply include the following:

  • Where the LCT has already been paid. If you sell a luxury car that is less than 2 years old and that has already been subject to LCT, you'll only have to pay the LCT when selling the car if it has increased in value.
  • When the vehicle is modified for disability access. Although the base price of a vehicle bought by or for a disabled person is subject to LCT, any modifications to help them drive it, or be transported in it, are not included in its taxable value.
  • When an endorsed public institution imports a vehicle for display only. If the vehicle being imported is a collector's piece or a work of art that is intended for public display only, these institutions can reclaim any LCT paid.
  • Re-imported vehicles. If a model is bought locally and LCT is paid but then the vehicle is shipped out of the country for modification, repair, upgrades or restoration, it can be brought back in as a non-taxable importation. This might happen when purchasing a car that requires a modification that can only be carried out elsewhere.

Looking to buy a car that triggers the luxury car tax?

There are several financing options available that might help you manage the added cost. Compare car loan options from a range of lenders in Australia to help you save.

How to calculate your luxury car tax

car-loan-repayment-calculator Working out exactly how much LCT you will have to pay for your car can be influenced by a number of factors, including whether you are selling or importing the car.

If you need to work out the amount of LCT payable on the sale of a luxury car, start by subtracting the current LCT threshold ($69,152 for ordinary vehicles; $79,659 for environmentally-friendly variants) from the price of the car (including GST). Next, divide this amount by 1.1 (the 10% GST rate). Finally, multiply the number you now have by 33%, remembering that the LCT rate is 33%. This will give you the amount of LCT payable on your car.

The LCT value is a car’s retail price, minus any LCT included in the sale price and minus any other Australian taxes, fees or charges (but including GST, dealer fees, optional accessories, incentives and customs duty).

If you’re importing a car, use the following formula to calculate the luxury car tax payable:

  • (LCT value – LCT threshold) x 10 ÷ 11 x 33%

It’s also important to remember that the LCT value of a car will include the following:

  • The customs value of the car and any parts, accessories or attachments.
  • The cost of the international transport of the car to Australia.
  • The amount for the insurance of the car to be imported to Australia.
  • Any customs duty payable.
  • Any GST payable.
  • If the car can be imported GST-free, an amount equal to the GST that would otherwise have been charged is included in the car’s LCT value.

Finally, if you supply a luxury car that is less than 2 years old and on which LCT has already been paid, the LCT you will have to pay for this latest sale can be reduced by the amount of LCT that was paid on the previous sale or importation. In these cases, you will only have to pay LCT if the car has increased in value, in which case LCT will only apply to the amount of the increase.

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