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Edited version of your written advice
Authorisation Number: 1051292174149
Date of advice: 11 October 2017
Ruling
Subject: Luxury car tax
Question
Is luxury car tax payable on the importation of a racing car that was specifically built to compete in the World Racing Championship?
Answer
No.
This ruling applies for the following periods:
2015-16 income year
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You are not registered for goods and services tax.
In 2015 you imported a racing car into Australia and luxury car tax (LCT) was applied.
The racing car was specifically manufactured overseas, in very limited numbers, by the manufacturer’s specialised team as a dedicated racing car before 2000 to compete in the World Racing Championship. You provided a copy of the Car Body Record for the racing car which included the various events the racing car had competed in as well as the driver’s names and race placings for the respective events.
The racing car is based on a high performance production car. The specifications, components and features have been included with this ruling.
Every component of the racing car is designed to maximise performance in a racing environment. The racing car was designed for a driver and a navigator only and is not designed to carry additional passengers or cater for personal items.
The Department of Transport of the State which the racing car was imported into denied the racing car’s registration for use on public roads.
Relevant legislative provisions
A New Tax System (Luxury Car Tax) Act 1999 section 7-5,
A New Tax System (Luxury Car Tax) Act 1999 section 25-1 and
A New Tax System (Luxury Car Tax) Act 1999 section 27-1.
Reasons for decision
The liability for luxury car tax (LCT) arises when a taxpayer makes an importation of a luxury car, under section 7-5 of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act). An exception to this rule is if the vehicle imported is not a luxury car within the LCT Act.
What is a luxury car?
Section 25-1 defines ‘luxury car’ as:
a car whose luxury car tax value exceeds the luxury car tax threshold.
The LCT threshold for the 2015-16 financial year was $75,375 for fuel-efficient vehicles and $63,184 for other vehicles. Luxury car tax was applied to your Racing Car because its luxury car tax value exceeded the LCT threshold.
In light of that, attention should be drawn on whether the vehicle is considered a ‘car’ under the LCT Act.
Relevantly, section 27-1 of the LCT Act defines ‘car’ as:
a motor vehicle (except a motor cycle or similar vehicle) that is:
(a) designed to carry a load of less than 2 tonnes and fewer than 9 passengers; or
(b) a limousine (regardless of the number of passengers it is designed to carry)
In turn, ‘motor vehicle’ is defined to mean:
a motor-powered road vehicle (including a 4 wheel drive vehicle)
As the vehicle is motor-powered and designed to carry a load of less than 2 tonnes and fewer than 9 passengers, the issue then is whether the vehicle is a ‘road vehicle’.
What is the meaning of ‘road vehicle’?
‘Road vehicle’ is not defined in the LCT Act. However, guidance could be drawn from the Goods and Services Tax Advice GSTA TPP 077 (‘ATO Ruling’) which explored the definition of a ‘car’ and, relevantly, ‘motor vehicle’ for the purposes of input tax credit claims.
The ATO Ruling referred to paragraph 3.2 of the Sales Tax Ruling SST 13 which stated the following:
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.
Reference to the class of vehicle is further elaborated in the ATO Ruling accordingly:
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. … For example, where a standard passenger car is modified for rallying or racing and the modifications do not extend to changing its fundamental design, it will remain a car.
If the rally car or racing car, including any modifications or add-ons, is of a class of vehicle designed to be used only on racing or rally circuits or off-road, and is not capable of being registered for use on public roads, it is not a 'car' as defined. … For example, where a racing car is designed and built from the ground up, or a standard passenger car is redesigned, stripped and rebuilt so that nature and fundamental design of the vehicle makes it incapable of being registered for use on public roads, it is not a ‘car’ as defined.
[Emphasis added.]
Is the Racing Car a ‘luxury car’?
The racing car was specifically manufactured and designed to compete in the World Racing Championship which is evidenced by the success the racing car had achieved in various racing competitions as recorded in the Car Body Record.
Unlike the production car, the manufacturers of the racing car did not intend to extend its use to public roads. The construction and modifications made to the racing car are racing-focussed and significantly alters the nature and fundamental design of the vehicle to make it not registrable for use on public roads.
Accordingly, the racing car falls within the class of vehicle designed to be used only on racing circuits or off-road, and is not capable of being registered for use on public roads. The racing car is not a ’car‘ under section 27-1 of the LCT Act and therefore not subject to LCT.
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