Edited version of private ruling

Authorisation Number: 1011611530463

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Ruling

Subject: LCT and certain motor vehicles.

Question

Are the vehicles in question considered to be cars within the meaning of section 27-1 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)?

Answer

Yes, the vehicles in question are considered to be cars within the meaning of section 27-1 of the LCT Act.

Relevant facts

An entity has imported the two vehicles which were manufactured after 2000.

Both vehicles are designed to carry a load of less than two tonnes and fewer than nine passengers.

The broker who arranged the goods to be imported to Australia claimed LCT exemption code of L251 (that is, for race cars).

The conditions of an import approval issued under Regulation 18(1)(e) of the Motor Vehicle Standards Regulations 1989 - Exhibition purposes - provides that the vehicles:

· must not be registered for use in Australia;

· must not be driven on public roads in Australia;

· must not be supplied to the market in Australia.

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999

· Division 25

· Division 27

Reasons for decision

Detailed reasoning

Subsection 25-1(1) of the LCT Act defines a 'luxury car' as a 'car whose value exceeds the luxury car tax threshold'.

Section 27-1 of the LCT Act defines a car as meaning a motor vehicle (except a motor cycle or similar vehicle) that is designed to carry a load of less than two tonnes and fewer than 9 passengers; or a limousine (regardless of the number of passengers it is designed to carry).

The critical issue in this case is whether the vehicles are cars, for the purposes of the LCT Act.

Therefore, in order to determine whether the vehicles are cars, the following need to be established first. They are:

· whether they are motor vehicles

· whether they are designed to carry a load of less than two tonnes and fewer than 9 passengers.

Motor Vehicle

The term motor vehicle is defined in section 27-1 of the LCT Act as meaning a motor-powered road vehicle (including a 4 wheel drive vehicle).

The term road vehicle is not defined in the LCT Act .Guidance on the meaning of the term 'road vehicle' can be found in the Motor Vehicle Standards Act 1989 (the object of which is to achieve uniform vehicle standards to apply to road vehicles used for transport in Australia).

Section 5 of the Motor Vehicle Standards Act defines a 'road vehicle' to mean a road motor vehicle, a road trailer or a partly completed road vehicle. Section 5 of the Motor Vehicle Standards Act further defines the term 'road motor vehicle' as:

· a motor vehicle designed solely or principally for the transport on public roads of people, animals or goods, or

· a motor vehicle that is permitted to be used on public roads.

Additionally the meaning of the term road vehicle is discussed in Goods and Services Tax Advice GSTA TPP 077 Goods and services tax: Can an entity that purchases a rally car with a market value that exceeds the car limit claim input tax credits in excess of 1/11th of the car limit? GSTA TPP 077 is available on our website. GSTA TPP 077 states:

The term 'road vehicle' is discussed in Sales Tax Ruling SST 13. Paragraph 3.2 states:

The term 'road vehicle' refers to the class of vehicle, not to the actual use to which a particular vehicle may be put. It is a road vehicle if it is in a class of vehicle that is designed for use on public roads and it would be a road vehicle even though it may never be used or registered for use on public roads.

Paragraph 3.2 of SST 13 further states the following:

If the nature and fundamental design of a vehicle used as a rally or racing car, including any modifications or add-ons, makes it of a class of vehicle suitable and capable of being registered for use on public roads, anywhere in the world, it is a 'car' as defined.

Having considered these definitions, for the purposes of the LCT Act, a road vehicle is a vehicle that is designed for use on public roads.

Vehicle X

According to the research done the vehicle is not designed with racing in mind.

Literature perused indicates that the vehicle is more at home on the road.

Vehicle Y

Information gathered provides that the vehicle is an ultra high-performance vehicle.

The websites perused also show pictures of the vehicle bearing registration plates. Therefore the information gathered indicates that the vehicle is registrable to be used on the roads.

It is evident that the vehicles in question are designed for road use but advanced concepts in racing technology have also been applied/utilised resulting in vehicles with specifications and features that may be designed for both road and race conditions.

Even though the vehicles are subject to conditions that they:

· must not be registered for use in Australia;

· must not be driven on public roads in Australia;

· must not be supplied to the market in Australia;

they are still considered to be of a class of vehicle that is designed for road use and therefore are road vehicles. Consequently, we are of the view that the above vehicles are motor powered and fall within the definition of 'motor vehicle'.

Design

As the above vehicles are designed to carry a load of less than two tonnes and fewer than nine passengers, the vehicles fall within the definition of 'car' under section 27-1 of the LCT Act.

Additional information

Are the vehicles Luxury cars and is LCT payable?

Where the LCT value of the vehicles exceeds the LCT threshold the vehicle and coupe will be considered to be 'luxury cars' under subsection 25-1(1) of the LCT Act.

However, subsection 25-1(2) of the LCT Act, provides that a car is not a luxury car if it is:

· a prescribed emergency vehicle

· specifically fitted out for transporting disabled people seated in wheelchairs (unless the supply of the car is GST-free under Subdivision 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act),

· a commercial vehicle, or

· a motor home or campervan.

Sports cars are not excluded from being luxury cars, as they are not prescribed emergency vehicles, commercial vehicles, motor homes or campervans.

Subsection 7-10 of the LCT Act provides that an entity makes a taxable importation of a luxury car if the luxury car is imported and is entered for home consumption.

In this case we are of the view that the importations of the vehicles are taxable importations of luxury cars under section 7-10 of the LCT Act.

Please note that:

· under subsection 7-10(2) of the LCT Act the importation of a car includes any car parts, accessories or attachments imported at the same time as the car and that could reasonably be expected to be fitted to the car.

· section 9-5 of the LCT Act provides that an entity can defer payment of the LCT if the entity is entitled to quote an Australian business number and has the intention of holding the car as trading stock, or for research and development for the car manufacturer, or exporting the car as GST-free under Subdivision 38-E of the GST Act.

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