Edited version of private advice

Authorisation Number: 1051543962955

Date of advice: 09 July 2019

Ruling

Subject: Luxury Car Tax

Question

Does the people mover type vehicle model meet the definition of a luxury car for the purposes of section 25-1 of the A New tax System (Luxury Car Tax) Act 1999 (LCT Act)?

Answer

Yes, the Commissioner ruled that the people mover type vehicle meets the definition of a luxury car under the LCT Act.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You purchased a people mover type vehicle model from a licensed motor dealership on 27^th February 20XX at a final purchase price of $97,609.

You have submitted that the features of the vehicle include: eight seat capacity (two permanent seats with six removable), cargo space with rails, tie down hooks to rails, towbar with ball weight of 150kg, shelf for barrier, easybase for cargo as add-on, electric brake controller for towing above 750kg as add-on, installed roof rails with capacity of 150kg as add-on and permissible nose weight of 100kg.

You have stated that the figures from the compliance plate of the vehicle that show the GVM is 3100kg. Information obtained from the Australian Mercedes Benz website's brochure for the V-class 250d, the kerb weight is 2145kg.

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999 section 5-5,

A New Tax System (Luxury Car Tax) Act 1999 section 25-1

A New Tax System (Luxury Car Tax) Act 1999 section 27-1.

Reasons for decision

Under section 5-5 of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), luxury car tax (LCT) is payable on any taxable supply of a luxury car.

Paragraph 25-1(2)(c) of the LCT Act provides the definition of a luxury car and states:

25-1 Meaning of luxury car

1)    A luxury car is a *car whose *luxury car tax value exceeds the *luxury car tax threshold.

2)    However, a *car is not a *luxury car if it is:

a)    a vehicle that is specified in the regulations to be an emergency vehicle, or that is in a class of vehicles that are specified in the regulations to be emergency vehicles; or

b)    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 *GST Act); or

c)    a commercial vehicle that is not designed for the principal purpose of carrying passengers; or

d)    a motor home or campervan.

[Emphasis added.] (Item marked with an * are defined in the dictionary at section 27-1 of the LCT Act).

According to section 27-1 of the LCT Act a car is defined as follows:

car means 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).

motor vehicle means a motor-powered road vehicle (including 4 wheel drive vehicles).

The people mover type vehicle model is a motor-powered road vehicle with an 8 seater capacity, thus would fall under the definition of a car for the purposes of the LCT Act.

Under paragraph 25-1(2)(c) of the LCT Act, a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers.

For LCT purposes, a commercial vehicle is:

·         designed for the principal purpose of carrying goods used for business or trade

·         not subject to LCT.

Commercial vehicles include:

·         trucks

·         hearses

·         some vans.

Vehicles designed mainly for carrying passengers (including paying passengers), or for sport or recreation purposes, are not commercial vehicles and you may have to pay LCT on them. These vehicles include:

·         station wagons

·         passenger sedans

·         people movers

·         sports utility vehicles (SUVs).

To work out the main purpose (principal purpose) for which a vehicle has been designed, you need to consider, but not limited to, the following:

·         its appearance and presentation

·         relevant promotional material and how it is marketed

·         its specifications

·         the load carrying capacity

·         the number of passengers it can carry.

This is known as the 'principal purpose test' which is set out in TD 94/19.

One way to assist in working out the main purpose (principal purpose) for which a vehicle has been designed, see Miscellaneous Taxation Ruling MT2024.

Paragraphs 14 to 16 of the Miscellaneous Taxation Ruling MT2024 detail the method to determine whether the principal purpose of a vehicle is for carrying passengers and the relevant extracts state the following:

14)   It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. This approach is consistent with that adopted under the Australian Design Rules in determining what is a passenger vehicle.

15)   For this purpose 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 purpose of the application of the Australian Design Rules.

16)   If the total passenger weight so determined exceeds the remaining "load" capacity, the vehicle is to be treated as being designed for the principal purpose of carrying passengers.

The people mover type vehicle has been marketed on the local Australian motor dealership website as a vehicle that is "Luxury is a full life with room to spare" and "families travel in new levels of comfort, adventure-seekers experience every moment even more intensely and passengers reach their destination as comfortably and stylishly as ever".The vehicle has been marketed and has the appearance as a luxurious people mover type vehicle.

The cargo space with rails, tie-down hooks to rails and roof rails are considered to be standard as part of the vehicle offering as a multi-purpose people mover with modular seating arrangements up to eight seats including the driver. A towbar and various add-ons (easybase for cargo, electric brake controller) have been included. These add-ons have not changed the marketing or use of the vehicle as a people mover and there has been no irreversible modifications made to the vehicle.

There's no indication that these add-ons have changed the appearance or use of the vehicle from a passenger carrying to a carrying goods one.

Furthermore, when applying the test from MT2024 to the specifications of the people mover vehicle model yields the following result:

·         the load capacity is 1140kg (GVM - unladen vehicle mass = 3100 - 2145 = 955)

·         the passenger capacity for 8 passengers (including the driver) is 8 x 68kg = 544kg

·         the remaining load capacity is (955kg - 544kgs) = 411kg

The passenger capacity (544kg) exceeds the remaining load capacity (411kg).

As such, considering the factors and applying the Principal Purpose test the people mover vehicle model as presented is designed for the principal purpose of carrying passengers and has a meaning of a luxury car under the LCT Act. There is no need to apply the test in MT2024 as the Principal Purpose Test has shown that the vehicle has been designed for the primary purpose of carrying passengers and not goods.

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