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  • ATO action to reduce the gap

    Luxury car tax (LCT) is paid by:

    • businesses that sell or import luxury cars
    • individuals who directly import luxury cars.

    The LCT is imposed only if both the:

    • value of the car exceeds the LCT threshold
    • sale of the car occurs within two years of manufacture or importation.

    Our data and experience show most people try to comply with their LCT obligations. We aim to make it as easy as possible to help them meet their obligations by providing up-to-date guidance and information on our website. We also provide advice where the law is unclear.

    We have observed small amounts of non-compliance, as well as tax avoidance schemes and arrangements directed at avoiding LCT. We have systems in place to identify these behaviours. We take firm action to ensure legislation is complied with and enforce a level playing field for businesses.

    We focus on the activities of those who actively try to avoid their LCT obligations. Some of the behaviours we are most concerned about that contribute to the tax gap include:

    • resellers who undercut legitimate dealers on price by evading LCT and GST on luxury car sales
    • entities who attempt to pass off private luxury car purchases as a trading enterprise to fraudulently access LCT and GST benefits
    • dealers or resellers falsely asserting that luxury cars are being held solely as trading stock when the cars are being used frequently for 'extended' test drives, personal use or informally leased or sold.

    Our compliance work targets these behaviours by:

    • letting taxpayers know we are targeting arrangements designed to avoid LCT and highlighting the risks of participating in them
    • stopping, retaining and reviewing LCT refunds
    • applying anti-avoidance provisions to artificial and contrived arrangements to avoid payment of LCT
    • prosecuting people who undertake fraudulent or criminal activity.

    See also:

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      Last modified: 19 Oct 2021QC 64036