Guide to luxury car tax
Guide to luxury car tax
Overview
Luxury car tax (LCT) is a tax of 33% on luxury cars.
Working out when LCT applies
A luxury car is a car with a GST-inclusive value above the LCT threshold (currently $59,133). Generally, you only need to pay LCT when you sell or import a luxury car. You need to pay LCT as well as any goods and services tax (GST) payable.
Selling a luxury car
A luxury car is subject to LCT if you sell it in the course of your business and in connection with Australia, and you are registered or required to be registered for GST.
How to work out the LCT amount
You only apply LCT to the value of the vehicle above the LCT threshold, less GST. Generally, the LCT rate for cars delivered or imported after 3 October 2008 is 33%.
Registering, reporting and paying
You can register for LCT at the same time you register for GST. You account for LCT when completing your activity statement for the tax period that applies for GST.
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Terms we use
When we say:
- sale or purchase, we are referring to the GST terms supply and acquisition
- GST credits, we are referring to the GST term input tax credits
- payment made or received, we are referring to the GST term consideration
- business, we are referring to the GST term enterprise.
When we say luxury car tax (LCT) paid, we mean LCT that:
- has already been paid
- is due to be paid but has not yet been paid.
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Luxury car tax - home
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Working out when LCT applies
You need to pay LCT at the time you sell a luxury car unless the purchaser quotes their ABN in an approved format. If you import a luxury car, you need to pay the LCT to Customs at the same time you pay the customs duty, unless you quote your ABN.
Luxury cars and the LCT threshold
A luxury car is a car with a GST-inclusive value above the LCT threshold, which in 2012-13 is:
- $75,375 for fuel-efficient cars
- $59,133 for other cars.
Who must pay LCT?
You must pay LCT if you are registered for GST and you sell a luxury car with a GST-inclusive value above the LCT threshold.
Importing a luxury car
If you import a luxury car into Australia, the car will be subject to LCT if you don't quote your ABN and you enter the car for home consumption.
Luxury cars and the LCT threshold
A luxury car is a car with a GST-inclusive value above the LCT threshold, which in 2012-13 is:
- $75,375 for fuel-efficient cars
- $59,133 for other cars.
What is a luxury car?
Under LCT law, a car is a motor-powered road vehicle that is designed to carry both of the following:
- a load of less than two tonnes, and
- less than nine passengers.
It includes:
- passenger cars
- station wagons
- four-wheel drive vehicles.
Limousines, regardless of the number of passengers they are designed to carry, are also cars under LCT law.
The term 'car' doesn't include:
- trucks and vans designed to carry a load of more than two tonnes
- vehicles, such as buses, designed to carry nine or more passengers
- motorcycles or similar vehicles
- racing and rally cars that are not road vehicles and cannot be registered for use on public roads in any country in the world. These racing or rally cars are designed for use only on rally or racing circuits.
The LCT threshold
The LCT threshold is $59,133 for the 2012-13 financial year.
The LCT threshold for fuel-efficient cars is $75,375 for the 2012-13 financial year. For LCT purposes, fuel-efficient cars are cars that have a fuel consumption of seven litres per 100 kilometres or less.
These thresholds are reviewed each financial year and may change.
In general, the value of a car includes the value of any parts, accessories or attachments supplied with the car or imported at the same time as the car.
Who must pay LCT?
You must pay LCT if the following applies:
- you are registered for GST
- you sell a luxury car with a GST-inclusive value above the LCT threshold.
This includes:
- retailers
- wholesalers
- manufacturers
- other business that sell cars.
If you import luxury cars, even if you are a private buyer, you may also have to pay LCT.
Importing a luxury car
If you import a luxury car into Australia, the car will be subject to LCT if both of the following occur:
- you don't quote your ABN, and
- you enter the car for home consumption.
The import of a car includes any car parts, accessories or attachments imported at the same time that could reasonably be expected to be fitted to the car.
If the luxury car has been restored overseas using parts that were purchased and exported from Australia, it will be subject to LCT unless the restorer quotes their ABN.
You won't have to pay LCT on an importation if one of the following applies:
- you quote your ABN
- LCT has already become payable on the car (for example, you take a luxury car overseas, having already paid LCT on the vehicle, and you later return with the car to Australia)
- the car is covered by certain items in Schedule 4 of the Customs Tariff Act 1995
- the car is a non-taxable re-importation.
Selling a luxury car
If you sell a car above the LCT threshold, you are selling a luxury car and are therefore liable for LCT.
When LCT applies to the sale of a luxury car
A luxury car is subject to LCT if you sell it in the course of your business and in connection with Australia, and you are registered or required to be registered for GST.
When LCT doesn't apply to the sale of a luxury car
A luxury car is not subject to LCT in some circumstances, such as when the person receiving the car quotes their ABN in the approved form or the car is an emergency vehicle.
Luxury cars where LCT has already been paid
If you sell a luxury car that is less than two years old and the car has already been subject to LCT, you will only have to pay LCT on the latest sale of the car if the car has increased in value.
Providing a car to an associate or GST group member
If you sell a luxury car to an associate, or provide one to a member of your GST group or joint venture, the vehicle is subject to LCT.
Additional accessories, modifications and treatments
The LCT value of a luxury car generally includes the price of all accessories, modifications and treatments made to the car.
When LCT applies to the sale of a luxury car
The following examples are all considered to be a sale under LCT law:
- a dealer sells a car to an individual or business and the car's title passes from the manufacturer (or importer) to the finance company, then to the dealership, then to the end customer. Each stage is regarded as a separate sale.
- a dealer, wholesaler, manufacturer or importer provides a luxury car to an employee, either as a bonus or as part of a salary package
- the sale of a car to a Commonwealth, state or territory department, agency or statutory authority
- the sale or trade-in of a car that is a capital asset of a business.
Luxury cars you sell are subject to LCT if all of the following apply:
- you sell it in the course of your business
- you sell it in connection with Australia
- you are registered or required to be registered for GST.
When LCT doesn't apply to the sale of a luxury car
Luxury cars you sell are not subject to LCT if the person receiving the car quotes their ABN in the approved format or any of the following apply:
- the car was manufactured in Australia and is more than two years old
- the car was imported and entered for 'home consumption' more than two years before the sale
- the car is exported as a GST-free export under GST law
- the car is an emergency vehicle
- the car is not GST-free and specially fitted out for transporting disabled veterans or certain people with a disability
- the car is a motor home or campervan, or
- the car is a commercial vehicle designed mainly for carrying goods and not passengers.
Luxury cars where LCT has already been paid
Generally, if you sell a car that is less than two years old and the car has already been subject to LCT, you will only have to pay LCT on the latest sale of the car if the car has increased in value. LCT will only apply to the amount of the increase. When you work out this increase you must also take into account any previous LCT adjustments, except bad debts.
If the LCT you are liable to pay on this latest sale is less than the sum of all LCT previously paid or due to be paid, the amount of LCT on the latest sale is zero. In these circumstances you can't claim a refund.
You must also have evidence that the car has previously been sold or imported and LCT was paid or due to be paid. This evidence may include:
- documents to show that your supplier made a taxable sale of a luxury car because you didn't quote your ABN
- invoices or documents relating to a previous taxable sale or importation
- a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid.
Providing a car to an associate or GST group member
Sale of a car to an associate
If you sell or give a luxury car to your employee, associate or an employee of your associate for less than the car's market value, the LCT value of the car will be its GST-inclusive market value excluding any LCT payable.
Cars provided between members of GST groups or GST joint venture participants
Unless the recipient quotes their ABN, you must pay LCT if you provide a luxury car to either:
- another member of your GST group
- another participant in your GST joint venture.
This applies if you provide the car within two years of one of the following:
- its manufacture in Australia
- the date of entry for home consumption (if imported).
Additional accessories, modifications and treatments
The LCT value of a luxury car you sell includes the price of all accessories, modifications and treatments made to the car or paid for by the customer (or their associate), provided you make them either:
- before the car is delivered to the customer
- under an arrangement with the supplier of the car, or with an associate of the supplier, at or before the time of delivery.
How to work out the LCT amount
You only apply LCT to the value of the vehicle above the LCT threshold, less GST. The formula you should use for working out your LCT amount depends on whether you:
- make an LCT sale
- import a luxury car
- purchase a car where LCT has already been paid.
The LCT rate
Generally, the LCT rate for cars delivered or imported after 3 October 2008 is 33%.
Working out the LCT on a sale
The LCT amount on the sale of a luxury car is:
- the car's LCT value
- less the LCT threshold
- less the amount of GST above the threshold
- times the LCT rate (generally 33%).
Working out the LCT on an import
The formula for calculating LCT on an import is the same as for calculating LCT on a sale, but the LCT value of the car is worked out differently.
Cars that LCT has already been paid on
When some LCT has already been paid, the latest sale price can take this into account.
The LCT rate
The rate of LCT that applies can vary depending on the following:
- when the car was ordered
- when the car was delivered
- the type of car (for example, if it is fuel efficient)
- if the purchaser of the car is a primary producer or tourism operator.
The following table outlines how to work out the rate of LCT for motor vehicle dealers and importers.
Type of car
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Cars delivered or imported before 1 July 2008
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Cars delivered or imported on or after 1 July 2008 and before 3 October 2008
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Cars delivered or imported after 3 October 2008
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Fuel-efficient cars under $75,375
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25% LCT applies
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
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LCT doesn't apply.
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Cars over the LCT threshold (including GST) and fuel-efficient cars $75,375 or over
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25% LCT applies
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
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Cars subject to LCT purchased by primary producers
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25% LCT applies
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
Primary producers can claim a refund of LCT from us of up to $3,000 on an eligible car.
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
Primary producers can claim a refund of LCT from us of up to $3,000 on an eligible car.
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Cars subject to LCT purchased by tourism operators
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25% LCT applies
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
Tourism operators can claim a refund of LCT from us of up to $3,000 on eligible cars.
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33% LCT applies or
25% for cars contracted before 7.30pm AEST on 13 May 2008.
Tourism operators can claim a refund of LCT from us of up to $3,000 on eligible cars.
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Working out the LCT on a sale
To work out the LCT amount on the sale of a luxury car, you should use the following formula:
The LCT value is the retail price of the car, less any:
- LCT included in the sale
- other Australian tax, fee or charge.
The retail price includes:
- GST
- any customs duty
- dealer delivery charges
- standard and statutory warranties.
Generally it doesn't include any other Australian tax, fee or charges, for example:
- stamp duty
- transfer fees
- registration
- compulsory third-party insurance
- extended warranties
- costs associated with financing the purchase of the car.
If LCT has already been paid on the car, you can reduce the amount you must pay by the amount of LCT that has already been paid.
Example: Working out the LCT you must report and pay
Christine sells a car worth $88,000 including GST. The value of the car is more than the LCT threshold ($59,133 for the 2012-13 financial year) so she must pay LCT to us on the sale of the car.
To work out the amount of LCT she must pay, Christine does the following:
- She works out the total value of the luxury car that is above the LCT threshold:
$88,000 (total luxury car value, including GST) - $59,133 (LCT threshold) = $28,867
- She subtracts the GST included in the amount above the LCT threshold:
$28,867 x 10 ÷ 11 = $26,242.72
- She then works out 33% of this amount (the amount above the LCT threshold less GST):
$26,242.72 x 33 ÷ 100 = $8,660.09 LCT payable
Christine charges $96,660.09 for the car: that is, $88,000 including GST + $8,660.09 LCT. She also reports and pays $8,660 LCT to us on her next activity statement.
Working out the LCT on an import
To work out the LCT amount you must pay if you import a car, use the following formula:
The LCT value of an importation is the customs value (as worked out under the Customs Act) of the car and of any parts, accessories or attachments that are imported at the same time as the car that can reasonably be expected to be fitted to the car (add-ons).
The LCT value includes:
- any cost for transport to Australia (if this is not included in the customs value)
- any cost for insurance while being transported to Australia (if this is not included in the customs value)
- any customs duty you must pay
- any GST you must pay on the import
- if the import is GST-free, an amount equal to the amount of GST that you would otherwise have had to pay.
Cars that LCT has already been paid on
The minimum reduction you are entitled to is the sum of all LCT that was previously payable up to and including the previous sale or importation that you have identified.
Example: Working out the LCT and GST payable when a luxury car has an 'all-up price' and some LCT has already been paid
Darren pays Athena an 'all-up price' of $95,017 for a second-hand car. LCT of $6,050.33 has been paid by a previous owner. The car is less than two years old and Darren does not quote his ABN. The LCT threshold for the 2012-13 financial year is $59,133.
- Athena takes out the GST and LCT payable (43% in all) from the amount above the LCT threshold:
($95,017 [all-up price] - $59,133 [LCT threshold]) ÷ 1.43 = $25,093.70
- She then multiplies this by the LCT rate of 33% to get the LCT payable:
$25,093.70 x 33 ÷ 100 = $8,280.92
- She subtracts $6,050.33 of LCT which was paid by a previous owner:
$8,280.92- $6,050.33 = $2,230.59
- Athena must then work out the GST included in the 'all-up price'.
First she works out the LCT value:
'All-up price' - LCT now payable on the sale
$95,017 - $2,230.59 = $92,786.41
The GST payable will be one-eleventh of this amount:
$92,786.41 x 1 ÷ 11 = $8,435,12
Therefore, the 'all-up price' of $95,017 Darren pays includes:
- $2,230.59 LCT
- $8,435.12 GST.
Registering, reporting and paying
You account for LCT when completing your activity statement for the tax period which also applies for GST.
If you are registered for GST, you must include any LCT you must pay on your activity statement. You should complete the LCT section of your activity statement for the period in which you make either:
- a taxable sale of a luxury car
- an adjustment to LCT.
You cannot claim GST credits for LCT.
You need to pay LCT as well as any goods and services tax (GST) payable.
Registering for LCT
Generally, if you operate a business that sells cars you will need to have an Australian business number (ABN) and be registered for GST.
LCT adjustments
If circumstances change after you sell or import a luxury car, you can adjust the amount of LCT payable through your activity statement.
Deferring your LCT payment
In some circumstances you can quote your ABN (using an approved format) at the time you purchase or import a luxury car to defer paying LCT until the car is sold or imported at the retail level.
Registering for LCT
Generally, if you operate a business that sells cars, you will need an Australian business number (ABN) and will need to be registered for GST.
To register for LCT, phone us on 13 28 66 during business hours. If you are not already registered for GST we can do this over the phone at the same time.
LCT adjustments
After you sell or import a luxury car, sometimes circumstances happen that change the amount of LCT you needed to pay in an earlier tax period or after you purchased a luxury car.
Types of adjustments include:
If things change, you must make an adjustment on your activity statement for the period when either:
- the change happens
- you find out about the change.
This adjustment increases or decreases the net amount of tax you must pay us.
An adjustment event
LCT adjustment events include:
- cancelling the sale of the vehicle - for example, where you had to pay LCT on the sale of a luxury car but you and the purchaser decided not to go ahead with the sale
- an increase or decrease in the payment received for the sale of a vehicle - for example, where you offer a purchaser a decrease through a volume discount and the LCT on the original price was accounted for in an earlier tax period (you will need to work out the LCT on the new price and the difference between the new LCT and the tax that has already been payable is the amount of the adjustment)
- causing a sale of a luxury car to become, or stop being, a taxable sale.
'Change of use' adjustments
These adjustments occur where either of the following happens:
- you quoted your ABN to defer your LCT payment on a luxury car but you then used the car for a purpose that is not a quotable purpose, or
- you did not quote your ABN to defer your LCT payment on a luxury car but you should have because you plan to use - and have only used - the car for a quotable purpose.
Bad debt adjustments
If you account for GST on a non-cash (accrual) basis, you can account for LCT on the sale of a luxury car before you receive any or all of the payment.
If you later write-off some or all of the payment due as a bad debt or if a debt has been overdue for 12 months or more, you have a decreasing LCT adjustment as you will not have received all the payment due on the sale.
If you later recover some or all of the debt, you must make an increasing LCT adjustment in the tax period you recovered some or all of the debt. This will increase the amount of LCT you must pay. The adjustment will be the amount of LCT you must pay on the amount you recovered.
Deferring your LCT payment
In some circumstances you can quote your ABN (using an approved format) at the time you purchase or import a luxury car to defer paying LCT until the car is sold or imported at the retail level.
You can quote your ABN and defer paying LCT when you purchase or import a luxury car if the following applies:
- you are registered for GST
- you have an ABN
- you plan to do one of the following (and nothing else)
- hold the car for trading stock, other than holding it for hire or lease
- carry out research and development for the manufacturer of the car
- export the car where the export is GST-free under GST law.
If you are a car dealer and you purchase a car to use only as a demonstrator vehicle for potential customers to see or test drive, you are holding the car as trading stock and can quote your ABN on the purchase of the car.
If you intend to use a luxury car for personal use, rally or race driving, staff salary packaging, promotion or sponsorship purposes, as an executive vehicle or as a capital asset, you are holding it for a purpose other than trading stock and will not be entitled to quote for it. This applies even if you intend to sell the car at a later date. If you have quoted your ABN and then use the luxury car for such a purpose you are required to pay the LCT.
If you are a business and import a luxury car to restore and sell it, you are holding it as trading stock. Provided you don't intend to use the car for any other purpose, you can quote your ABN.
If you are not registered for GST under GST law, you can't quote on the sale or purchase of a luxury car.
You must quote your ABN at or before the time of the purchase or import of the luxury car. You can't quote after buying the luxury car.
If you are charged LCT on a luxury car and you were entitled to quote your ABN, you can claim an LCT adjustment on your activity statement.
Last Modified: Friday, 27 July 2012
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