Find out exactly what the Luxury Car Tax is and whether or not it applies to your car.
What is Luxury Car Tax?
Luxury Car Tax (LCT) is a tax collected by the Australian Taxation Office on luxury cars. The tax is typically payable by businesses that purchase or import luxury cars, as well as non-business entities which import luxury cars.
LCT is a tax of 33% applied on the value of a car above the LCT threshold. However, this threshold is reviewed every year and there are other conditions that will determine whether or not a car qualifies for LCT.
How does luxury car tax work?
LCT is charged in addition to the GST on a vehicle, though you do not have to pay LCT on the full price of a vehicle. Instead, it's only payable at a 33% rate on the value of the vehicle which exceeds the LCT threshold. For the 2013-14 financial year, this threshold stands at $60,316, while fuel-efficient cars have a higher threshold of $75,375.
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 LCT is typically borne by businesses, in some cases they can pass this cost on to the final consumer.
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How to register for LCT
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 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 should luxury car tax be charged?
The issue of when LCT needs to be charged and when it does not can be quite a confusing issue for some business owners. 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. These include:
- Where LCT has already been paid. If you sell a luxury car that is less than two years old and which has already been subject to LCT, you’ll only have to pay LCT when selling the car if it has increased in value.
- 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 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 in order 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, carry out research and development work for the car manufacturer, or export the car where it is GST-free.
- 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. However, any modifications made to a vehicle in order for it to be driven by or to transport someone with a disability will not be included in the car’s LCT value.
How to calculate your Luxury Car Tax
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 ($60,316) from the price of the car (including GST). Next, divide this amount by 1.1 (the 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 in 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 (excluding GST and customs duty.
If you’re importing a car, use the following formula to calculate the LCT payable: (LCT value – LCT threshold) x 10/11 x 33/100. It’s also important to remember that the LCT value of a car will include:
- 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 which is less than two 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 on the amount of the increase.Back to top