Luxury car tax (LCT) was introduced in Australia in 2001 to protect the domestic car industry from imports. Retailers, wholesalers, manufacturers, and dealers that sell luxury cars must pay this tax. Entities with a GST registration that sell or import a luxury car need to pay luxury car tax, as do individuals who import luxury cars.
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You are required to pay LCT if you buy a car with a GST-inclusive value above the luxury car tax threshold defined for the year. The threshold values for each year are provided by the Australian Taxation Office (ATO). The threshold depends on the financial year the car was imported, acquired or sold, and has two levels -- one for fuel-efficient cars, and one for others.
A fuel-efficient car is defined as one that has a fuel consumption below seven litres per 100 kilometres. Such cars have a higher LCT threshold than others.
The rate of luxury car tax is 33 per cent of the value of the car above the threshold. This tax applies to the sale of cars that are two years old or less.
The LCT value of an imported vehicle includes:
The value of the car does not include taxes, stamp duty, transfer fees, registration, compulsory third-party insurance (CTPI), extended warranties, finance costs, or service plans.
If you sell a car that’s less than two years old on which luxury car tax has already been paid, then you’re liable to pay this tax again only if the value of the car has increased.
Just like other business taxes, you need to report and pay LCT on your activity statement. The accounting period for LCT is the same as for GST. You may pay LCT on a monthly, quarterly, or annual basis.
Once you register for LCT, labels 1E and 1F will appear on your business activity statement (BAS). You use these for LCT payments and adjustments.
Luxury car tax is to be paid by dealers who import cars, but they generally pass this cost on to the buyer. So effectively, the buyer pays a higher price for the car and bears the LCT burden.
LCT does not need to be paid on vehicles registered for use as emergency vehicles such as ambulances, firefighting, police, or search and rescue vehicles.
Endorsed public institutions such as museums, galleries, or libraries that have a GST registration and are endorsed as deductible gift recipients don’t need to pay luxury car tax if they import a car that’s a work of art for display. They don’t need to pay this tax if they sell a car purchased as a work of art or collector’s piece for display to another endorsed public institution for public display.
This article was reviewed by Mark Bristow before it was published as part of RateCity's Fact Check process.
