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.
You need to pay
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.
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.
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.
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:
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:
Applying for this type of account will mean that the 1E and 1F labels appear on your activity statement.
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:
However, instances when luxury car tax does not apply include the following:
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.
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:
It’s also important to remember that the LCT value of a car will include the following:
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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