Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Paying luxury car tax
Overview
3.1 Luxury car tax on supplies of luxury cars is added to the net amount under Division 17 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Adjustments in relation to supplies or importations of luxury cars can also be made to net amounts. These may increase or decrease the net amount.
3.2 Luxury car tax on importations of luxury cars is not incorporated into the net amount but is generally paid with customs duty.
3.3 This Chapter sets out how you pay the luxury car tax. It also describes how to work out luxury car tax adjustments to the net amount and when you can claim credits of luxury car tax that has been overpaid.
Paying the Luxury Car Tax
3.4 Luxury car tax is in addition to any goods and services tax (GST) that is payable on a car. The luxury car tax payable by you on taxable supplies of luxury cars is attributed to a tax period and added to the net amount under Division 17 of the GST Act for that tax period. [Section13-5]
3.5 If you have a positive net amount, the GST Act requires you to pay that amount to the Commissioner. Generally, you must pay it on or before the 21st day of the month following the end of your tax period to which the payment relates. See paragraph 4.10 for a discussion of net amount.
3.6 Similarly, any luxury car tax adjustments attributable to the tax period will alter the net amount for that tax period. Any increasing luxury car tax adjustments will be added to the net amount for the period, while any decreasing luxury car tax adjustments will be subtracted from the net amount for the tax period. Luxury car tax adjustments must be made within 4 years after the tax period to which the original supply or importation relates. [Section13-10]
3.7 Luxury car tax payable by you will be attributable to the same tax period that the GST on the supply is attributable to under Division29 of the GST Act. If the supply of the luxury car is not a taxable supply under the GST Act, then luxury car tax is attributable to the tax period it would have been attributable to if it were a taxable supply. [Subsection13-15(1)]
3.8 Division29 of the GST Act generally requires that all the GST on a taxable supply is attributable to the tax period in which the earliest of the following occurs:
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- you receive any consideration for the supply; or
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- an invoice is issued in relation to the supply.
3.9 However, different rules apply if you account on the cash basis. If you account on the cash basis, GST is attributable to the tax period or periods in which the consideration is received, and only to the extent of the amount of consideration received in each tax period.
3.10 Similarly, luxury car tax adjustments are attributable to the same tax period that the GST adjustment on the supply is attributable to under Division29 of the GST Act. If the luxury car tax adjustment does not also give rise to a GST adjustment, then the luxury car tax adjustment is attributable to the tax period it would have been attributable to if it were a GST adjustment. [Subsection13-15(2)]
3.11 Division29 of the GST Act generally requires that a GST adjustment is attributable to the tax period in which you became aware of the adjustment.
3.12 However, a decreasing adjustment arising from an adjustment event is only attributable to that tax period if the entity holds an adjustment note at the time of lodging its GST return. Instead, the adjustment is attributable to the first tax period in which the entity holds the adjustment note when it lodges its return. See section29-10 of the GST Act.
3.13 If you account on the cash basis, adjustments arising from adjustment events where (further) consideration is liable to be paid are attributable to the tax period or periods in which the consideration is provided, and only to the extent of the consideration provided in each period.
Paying luxury car tax on taxable importations of luxury cars
3.14 Luxury car tax on importations is generally payable at the same time and place, and in the same manner as customs duty is, or would be, payable on the car. The Regulations can allow further time for payment and accordingly can specify the place and manner of payment. [Section13-20]
3.15 In some situations, an import may only be made temporarily. That is, a car is brought into Australia with the intention to take it out of Australia again, for example, the importation of a rally car for a world cup event held in Australia. In these situations, customs duty may be able to be delayed if the importer gives a security or undertaking to the Australian Customs Service for payment of the duty. Luxury car tax on such importations is delayed until the customs duty becomes payable. [Section13-25]
3.16 Section13-30 expressly states that Division 165 of the GST Act, the general anti-avoidance provisions, applies to luxury car tax payable upon an importation of a luxury car as if it were payable under the GST Act. See paragraph 4.14 for a discussion of the general anti-avoidance provisions.
Adjustments
3.17 Adjustments arise out of circumstances that occur after the supply or importation. They increase or decrease the net amount. They can be made by the supplier, or the recipient or the importer, depending upon the circumstances. Adjustments will ensure that the correct amount of luxury car tax is imposed.
3.18 An increasing luxury car tax adjustment will increase your net amount. A decreasing adjustment will decrease your net amount.
3.19 A luxury car tax adjustment can arise because of:
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- an adjustment event;
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- a change of use of the car; or
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- a bad debt being written off.
3.20 If a luxury car tax adjustment event occurs resulting in an incorrect amount of luxury car tax being paid, you must adjust your net amount. A luxury car tax adjustment event would be an event such as the:
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- cancellation of the supply of the luxury car;
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- changing of the consideration for the supply, such as through a volume discount; or
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- supply becoming, or stops being, subject to luxury car tax.
3.21 You make an adjustment to your net amount for a tax period if:
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- you have a luxury car tax adjustment event;
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- luxury car tax on the supply was attributable to an earlier tax period; and
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- the luxury car tax previously attributed is no longer correct because of the adjustment event.
3.22 The amount of the luxury car tax on the supply calculated taking into account any luxury car tax adjustments is the corrected luxury car tax amount . [Paragraph15-10(c)]
3.23 The amount of luxury car tax that was attributable to an earlier tax period is the previously attributed luxury car tax amount . It includes any luxury car tax adjustments previously made for that supply of the luxury car. [Section15-15]
3.24 If the corrected luxury car tax amount is greater than the previously attributed luxury car tax amount , you will have paid less luxury car tax than you should. You will have an increasing luxury car tax adjustment of an amount equal to the difference between the corrected luxury car tax amount and the previously attributed luxury car tax amount. [Section15-20]
3.25 If the corrected luxury car tax amount is less than the previously attributed luxury car tax amount , you will have paid more luxury car tax than you should. You will have a decreasing luxury car tax adjustment of an amount equal to the difference between the previously attributed luxury car tax amount and the corrected luxury car tax amount. [Section15-25]
3.26 Change of use adjustments can occur where:
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- you quoted on a supply or importation of a luxury car and you subsequently use the car for a purpose other than a quotable purpose; or
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- you did not quote on a supply or importation of a luxury car but should have because you intend to use, and have only used, the car for a quotable purpose.
See paragraphs 2.28 to 2.36 for discussion of when you can quote.
3.27 The correct amount of luxury car tax would not have been paid in either of these circumstances.
3.28 You have a decreasing luxury car tax adjustment if:
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- you were supplied with, or imported, a luxury car;
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- luxury car tax was payable because you did not quote;
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- you were registered at the time of supply or importation; and
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- you have used, and intend to use, the car only for a quotable purpose.
[Subsections 15-30(1) and 15-35(1)]
3.29 For example, a car dealer did not quote when he purchased a luxury car because the car was to be used by the executives of the dealership. Luxury car tax was paid on the supply. However, when the car was delivered the executives didnt use the car themselves but instead held it solely for trading stock. The car dealer is able to claim a decreasing luxury car tax adjustment.
3.30 The amount of the decreasing luxury car tax adjustment is equal to the amount of luxury car tax that was paid on the supply or importation. [Subsections15-30(2) and 15-35(2)]
3.31 You have an increasing luxury car tax adjustment if:
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- you were supplied with, or imported, a luxury car;
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- either:
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- no luxury car tax was payable because you quoted; or
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- you had a decreasing luxury car tax adjustment because of a change of use; and
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- you use the car for a purpose other than a quotable purpose.
[Subsections 15-30(3) and 15-35(3)]
3.32 For example, the above car dealer quoted when purchasing 10 luxury cars to be held as trading stock. No luxury car tax was paid on the supply. The car dealer later used one of the cars as a demonstration vehicle. Since the car is being used for a purpose other than a quotable purpose, the car dealer will have an increasing luxury car tax adjustment.
3.33 The amount of the increasing luxury car tax adjustment is equal to the amount of:
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- luxury car tax that would have been payable on the supply or importation if you had not quoted; or
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- the previous decreasing luxury car tax adjustment.
[Subsections 15-30(4) and 15-35(4)]
3.34 If you account for GST other than on a cash basis you may account for luxury car tax on the supply of a luxury car before you receive any or all of the consideration for the supply. If you have accounted for luxury car tax on a supply and you later write off as a bad debt some or all of the consideration you were due to receive for the supply, you will have accounted for luxury car tax but not have received an amount for that luxury car tax from the recipient of the supply.
3.35 You have a decreasing luxury car tax adjustment to reduce your net amount in the tax period in which you write off the debt, if:
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- you made a taxable supply of a luxury car;
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- the whole or part of the consideration for the supply has not been received; and
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- you write off as bad the whole or a part of the debt.
3.36 The decreasing luxury car tax adjustment is the amount of the luxury car tax payable on the amount written off. Subsection15-40(2) shows how to calculate the decreasing luxury car tax adjustment.
Recovering amounts previously written off
3.37 If you previously wrote off a bad debt for a taxable supply of a luxury car, had a decreasing luxury car tax adjustment, and later recover some or all of the debt, you will not have paid luxury car tax on the amount recovered. You have an increasing luxury car tax adjustment to increase your net amount in the tax period that you receive some or all of the debt. [Subsection 15-45(1)]
3.38 The increasing luxury car tax adjustment will be the amount of luxury car tax payable on the amount recovered. Subsection15-45(2) shows how to calculate the increasing luxury car tax adjustment.
Credits
3.39 You may be entitled to claim a credit for luxury car tax paid by yourself or the supplier of the luxury car. Credits are only available to people who are not entitled to an adjustment and may arise because the luxury car tax on the supply was overpaid, either because of an error in the calculation or by being unable to quote at the time of the supply or importation. Credits will ensure that the correct amount of luxury car tax is imposed.
3.40 You may claim a credit if:
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- you have a credit entitlement;
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- you are not registered or required to be registered; and
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- no one else has made a valid claim for a credit in relation to the credit entitlement.
3.41 A credit entitlement will arise if you have borne:
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- overpaid luxury car tax on a supply to you. For example, where the supplier charged more luxury car tax than was legally payable; or
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- luxury car tax on a supply, or importation, of a luxury car which was acquired for a quotable purpose but you were unable to quote because you were unregistered. An example may be where an unregistered research and development company acquired a luxury car to conduct research and development for the manufacturer of the car.
[Subsections17-5(2), (3) and (4)]
3.42 The Dictionary at section27-1 defines when you have borne luxury car tax. Subsection 17-5(5) sets out the amount of credit you are entitled to.
3.43 To receive a credit, you must claim the credit, in the approved form, within 4 years of becoming entitled to the credit. [Section17-10]