Luxury car tax
The luxury car tax (LCT) gap is the difference between the estimate of LCT payable if all taxpayers complied with the law (theoretical LCT payable) and actual LCT payable for a defined period, typically a financial year.
LCT is a tax of 33% on luxury cars sold or imported, where the value of the car exceeds the luxury car threshold.
Our broad approach to estimating the gap
To estimate the LCT gap, we use a bottom-up approach using ATO data and three external data sources:
- sales data sourced from VFACTS reports, published by the Federal Chamber of Automotive Industries
- recommended retail price data, published by Wheels magazine
- motor vehicle registration data from the roads authority in each state or territory.
By using this combination of data, we are able to estimate a theoretical LCT payable. We then compare the theoretical liability with actual LCT payable (as reported on the BAS in a financial year) to calculate the LCT gap.