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  • Exemption from GST

    If you are eligible to purchase a car GST-free, you are also entitled to:

    • lease a car GST-free, providing you meet the other conditions relating to intended use
    • purchase car parts (such as batteries, tyres and disc brake pads) GST-free.

    Petrol, oil or accessories such as mudflaps are not GST-free.

    If you satisfy the eligibility criteria, complete a Declaration for an exemption of GST on a car or car parts and present it to your car or car parts supplier.

    An eligible veteran with a disability can also obtain an approved form from the Department of Veterans’ Affairs.

    If you do not have a declaration for exemption before you purchase your car or car parts, the dealer or supplier may charge you GST. You may be able to obtain a refund of the GST after you have purchased your car or car parts, but it is simpler for you if the declaration is provided before you make your purchase. Under the tax law, we are unable to provide you with a direct refund of the GST you paid on either your car or car parts.

    On this page:

    See also:

    Purchasing a car

    Exemption from GST for an eligible person applies up to the value of the 'car limit'. The 'car limit' figure is set annually. You must pay GST on any amount above that limit.

    The value of the car you purchase does not include the value of any modifications made solely to adapt the car for you to drive or be driven in.

    If the value of a modified car exceeds the car limit, you must pay GST on the value above the car limit. You do not pay GST on the value of the modifications made to the car.

    See also:

    Leasing a car

    If you are eligible to purchase a car GST-free, then you can also lease a car GST-free, if both of the following apply:

    • the lease is for a minimum of two years, or you use the car to travel 40,000 kilometres from the date you lease it
    • you intend to use the car for the prescribed purpose for the whole of that period – for example, an eligible person with a disability must also plan to use the car to travel to or from gainful employment for the whole period.

    Novation arrangements

    Under a novation arrangement, you may agree with the lessor and the finance company to take over all or part of the lessee's rights and obligations under a lease.

    Whether a car is GST-free under a novation arrangement depends on the type of arrangement you enter into.

    If you lease it under a partial novation arrangement the car is GST-free. Under a partial novation lease your employer does not lease the car, but you lease it directly.

    If it is subject to a full novation arrangement the car is not GST-free. Under a full novation arrangement your employer leases the car.

    See also:

    Car parts

    If you are eligible to purchase a car GST-free, you are also entitled to purchase certain car parts GST-free, including items such as:

    • batteries
    • disc brake pads
    • tyres
    • oil filters
    • petrol filters
    • liquid petroleum gas (LPG) conversion kits
    • spark plugs
    • water and fuel pumps
    • radiator hoses
    • windscreens
    • head and tail light globes.

    Items that are not car parts are not GST-free, these include:

    • oil and grease
    • paint
    • hydraulic fluid
    • radiator or petrol additives
    • refrigerant gas
    • brake fluid
    • petrol.

    Accessories are not car parts and are not GST-free, these include:

    • spoilers
    • mudflaps
    • pin striping
    • roof racks
    • CD players.

    Parts that are not specifically for cars are not GST-free, for example, parts specifically for trucks, vans, buses, motor cycles and other machinery.

    Car parts purchased by a business for sale to eligible people are not GST-free for the business. The business must pay GST when it buys the car parts and can later claim a GST credit (if registered for GST) on their activity statement. The business can sell the car parts GST-free to eligible people when it receives a completed declaration.

    Car parts supplied to you during a repair of your car, and the cost of labour services in fitting those parts to your car, are GST-free. This is because the supply of car parts and labour to an eligible person is treated as a single GST-free ‘sale of car parts’.

    If car parts are supplied to you when you service your car and those parts are integral to the servicing of your car, for example, spark plugs fitted in the course of a service, then those parts and the labour services in fitting those parts are not GST-free. A car service, which typically involves mostly labour services with some integral parts, such as spark plugs or filters, is a taxable sale and incurs GST.

    Example 1: GST-free sale of car parts

    John has a current disability certificate. He goes to an automotive parts and accessories store where he purchases spark plugs and brake pads for his car. The spark plugs and brake pads are GST-free for John. If John later has the spark plugs and brake pads fitted by a mechanic, the labour will be a taxable sale because it is a separate supply of labour, not a sale of car parts.

    End of example

     

    Example 2: GST-free sale of car parts including labour for fitting the parts

    Justine sells tyres to Madge for a price that includes the cost of the labour associated with fitting and balancing the tyres. Madge also needs the brake pads in her car replaced. Madge has a current disability certificate. The sale and fitting of the tyres and the brake pads are GST-free.

    End of example

     

    Example 3: Taxable car parts sold as part of a service

    Anna has a current disability certificate. She takes her car to the mechanic for a routine service. In the course of the service, the mechanic changes the spark plugs in Anna’s car. The sale of spark plugs is integral to the car service and, as such, is not a GST-free sale of car parts but a taxable supply of labour services.

    End of example

     

    Example 4: GST-free sale of car parts including labour in fitting those parts made during a car service

    Jim has a current disability certificate. He takes his car to the mechanic for a routine service, including changing the spark plugs. During the course of the service, the mechanic finds that the exhaust system needs to be replaced. While the service itself, including the fitting of spark plugs, is not a GST-free sale of car parts, the sale and fitting of the exhaust system is GST-free.

    End of example
    Last modified: 06 Nov 2017QC 33252