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Edited version of private ruling
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Ruling
Subject: LCT and dual cab utes
Question
Are the different models of dual cab utes (utes) of Brand X, belonging to the standard and superior body types, subject to Luxury Car Tax (LCT)?
Decision
Under the current ATO view, if the LCT value of a dual cab ute belonging to any of the above body types exceeds the LCT threshold, it may be subject to LCT.
The ATO view will change from the 1st of July 2011 and from that date vehicles constructed for both the carriage of persons and the carriage of goods shall be considered to be primarily for carriage of goods, if the number of seating positions times 68 kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Unladen Mass'.
Relevant facts and circumstances
You are a car retailer and you are registered for the goods and services tax (GST).
You sell Brand X dual cab utes. Different models of the utes could be equipped with standard springs or comfort springs. Some models could be equipped with permanent dual cabs, which means the cabin has two rows of seats that cannot be altered or removed.
Any of the above models can be in the standard or superior body type.
The unladen mass (tare weight) of any model belonging to a particular body type will be same. Similarly, the gross vehicle mass (GVM) of any model belonging to a particular body type will be the same.
The unladen mass including the driver of the models belonging to the standard and superior body types is 2,100 kg and 2,200 kg respectively.
The GVM of the models belonging to the standard and superior body types is 3,100 kg and 2,900 kg respectively.
While in most cases the recommended retail price does not reach the LCT threshold, with the addition of after market items such as a tow bar, the selling price will exceed the LCT threshold.
All the utes are equipped with diesel engines and manual gear boxes.
Reviews of these utes appearing in newspapers indicate that the utes are designed for passenger comforts and long distance travelling.
Reasons for the decision
Subsection 25-1(1) of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act) provides that a luxury car is a car, whose luxury car tax value exceeds the luxury car tax threshold.
For LCT purposes a car means a motor vehicle (except a motor cycle or similar vehicle) that is designed to carry a load of less than 2 tonnes and fewer than 9 passengers or a limousine (regardless of the number of passengers it is designed to carry).
The Guide for taxpayers with a luxury car tax obligation (NAT 3394) provides the ATO view on the application of the LCT provisions.
Nat 3394 provides that some vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and goods. These vehicles include:
· dual cab vehicles;
· crew cab vehicles; and
· utility vehicles.
ATO view regarding dual purpose vehicles as and from 1 July 2011
For LCT purposes the designed passenger carrying capacity is to be determined by multiplying the designed seating capacity (including the driver's) by 68 Kg, which is the figure adopted for the purposes of application of the Australian Design Rules.
The Australian Design Rules definitions and Vehicle Categories state that:
"A vehicle constructed for both the carriage of persons and the carriage of goods shall be considered to be primarily for the carriage of goods if the number of seating positions times 68 kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Unladen Mass'."
Example: working out the main purpose of your vehicle
Brooke supplies a dual cab vehicle to a buyer with seats for five people, including the driver.
The value of the vehicle is more than the LCT threshold and the difference between the 'Gross Vehicle Mass'and the 'Unladen Mass' is 960kg.
The vehicle appears to have been designed for both the carriage of persons and the carriage of goods.
Brooke then looks at the passenger carrying capacity of the vehicle, which she works out as follows:
5 passengers x 68kg = 340kg
She then finds out if the passenger carrying capacity (340 K) is less than 50 percent of the difference between the 'Gross Vehicle Mass'and the 'Unladen Mass' (960 K).
50% X 960 K = 480 K
In this instance, because the passenger weight (340kg) is less than 50% of the remaining goods capacity (480 K), Brooke works out that the principal purpose of the vehicle is to carry goods.
ATO view regarding dual purpose vehicles prior to 1 July 2011
Example: working out the main purpose of your vehicle
Brooke supplies a dual cab vehicle to a buyer with seats for five people, including the driver.
The value of the vehicle is more than the LCT threshold and the difference between the 'Gross Vehicle Mass'and the 'Unladen Mass' is 960kg.
The vehicle appears to have been designed for both the carriage of persons and the carriage of goods.
Brooke uses the 'principal purpose test'. Brooke looks at:
1. 1 the appearance and presentation - although it can be used for carrying goods used for business or trade, the interior is designed to give greater comfort to passengers than a normal commercial vehicle, and
2. 2 the marketing and promotional material - these point out that the vehicle is designed for comfort and can be used for leisure activities, as well as to carry goods used for business or trade.
Brooke then looks at the load carrying capacity of the vehicle, which she works out as follows:
5 passengers x 68kg = 340kg
She then works out the remaining goods capacity:
(load capacity - passenger weight) = goods capacity (960-340) = 620 kg
In this instance, because the passenger weight (340kg) is greater than 50% of the remaining goods capacity (620 x 50% = 320 kg), Brooke works out that the principal purpose of the vehicle is to carry passengers.
When weighing all of these facts, Brooke decides that the vehicle's design is aimed more towards passenger comfort and its use in leisure activities than its ability to carry goods used for business or trade. Therefore, LCT will apply to the vehicle.
Please note that in situations where it would appear that a vehicle is designed for a dual purpose but the overall principal purpose is to carry passengers, then despite finding the vehicle has a greater load carrying capacity than a passenger carrying capacity using the above calculation, the vehicle may still be subject to LCT.
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