Edited version of private advice

Authorisation Number: 1051722901503

Date of advice: 3 August 2020

Ruling

Subject: GST - luxury car tax

Question 1

Is the specified dual cab utility vehicle purchase considered to be a car & subject to the car cost limit rules?

Answer

Based on the information provided, it is considered that the dual cab utility vehicle is a commercial vehicle and not subject to the car limit for GST purposes. Please refer to the reasons for decision for additional information.

Question 2

Is the specified dual cab utility vehicle purchase considered to be a commercial vehicle that is not designed for the principal purpose of carrying passenger & exempt from the car cost limit rules?

Answer

Refer to the answer to question 1.

This ruling applies for the following periods:

Not Applicable

The scheme commences on:

Not applicable

Relevant facts and circumstances

The entity is carrying on an enterprise and registered for goods and services tax (GST).

The entity is intending to purchase a dual cab utility vehicle.

The payload/carrying capacity for this vehicle is 712kg (Gross Vehicle Mass 3300kg, Kerb Weight 2588kg)

The seating capacity for this vehicle is 5 people.

The towing capacity for this vehicle is 4500kg.

The vehicle will be used to transport the director and/or equipment to and from the job sites and carrying out the business operations.

The vehicle will primarily be used for business and some private use to be determined upon logbook completion.

No modification will be carried out on the vehicle at the time of purchase.

It will be registered as commercial goods vehicle.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 - Subsection 69-10(1), subsection 69-10(4)

A New Tax System (Goods and Services Tax) Act 1999 - section 195-1

A New Tax System (Luxury Car Tax) Act 1999 - subsection 25-1(2)

A New Tax System (Luxury Car Tax) Act 1999 - paragraph 25-1(2)(c)

Income Tax Assessment Act 1997 - Subsection 40-230(1)

Income Tax Assessment Act 1997 - section 995-1

Reasons for decision

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) does not define the meaning of a car. Section 195-1 of the GST Act provides that car has the meaning given by section 995-1 of the ITAA 1997.

'Car' is defined under section 995-1 of the ITAA 1997 as a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.

Subsection 40-230(1) of the ITAA 1997 states that:

The first element of the cost of a car designed mainly for carrying passengers (after applying section 40- 225 and Subdivision 27-B) is reduced to the car limit for the financial year in which you started to hold it if its cost exceeds that limit.

A vehicle that is not defined as a car mainly designed for carrying passengers will not be subject to the car limit under section 40-230 of the ITAA 1997.

Dual cab vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and goods. The principal purpose of these vehicles depends on its load carrying capacity and whether it is designed to carry mainly passengers or goods.

Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: Dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel (MT 2024) provides guidance on determining the principal purpose of vehicles such as dual cab utilities.

MT 2024 details the method used to determine whether the principal purpose of a vehicle is for carrying passengers and states the following at paragraph 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 (ADR) in determining what is a passenger vehicle.

The ADR at 4.5.2 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 68kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Un-laden Mass'.

Based on the information provided, the dual cab utility vehicle has a payload of 712kg and is designed to carry five passengers. Applying the test, the passenger carrying capacity is 340kg, (5 x 68kg) which is less than 50% of the pay load. Therefore, this vehicle is considered to be primarily designed for the carriage of goods.

Subsection 69-10(1) of the GST Act provides that if:

(a) you are entitled to an input tax credit for a * creditable acquisition or * creditable importation of a * car; and

(b) you are not, for the purposes of the A New Tax System (Luxury Car Tax) Act 1999, entitled to quote an * ABN in relation to the supply to which the creditable acquisition relates, or in relation to the importation, as the case requires; and

(c) the * GST inclusive market value of the car exceeds the • car limit for the * financial year in which you first used the car for any purpose;

the amount of the input tax credit on the acquisition or importation is the amount of GST payable on the supply or importation of the car up to 1/11 of that limit.

However, subsection 69-10(4) of the GST Act states that section 69-10 does not apply in relation to:

(a) the acquisition or importation of a * car that is not a * luxury car because of subsection 25-1(2) of the A New Tax System (Luxury Car Tax) Act 1999;

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; or

Consequently, because of subsection 25-1(2) of the LCT Act the vehicle is not a luxury car for the purposes of section 69-10(4) of the GST Act and section 69-10 of the GST Act will not apply to the acquisition of the vehicle. Therefore, the car limit will not apply to the Chevrolet Silverado dual cab vehicle purchase.

Additional information:

Goods and services tax ruling GSTR 2006/4 explains about determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose.

Paragraph 40 of GSTR 2006/4 states:

40. The meaning of 'creditable purpose' is stated in the same terms for both acquisitions and importations in the GST Act. It requires you to consider both of the following conditions:

(i) you acquire a thing or import goods for a creditable purpose to the extent that you do so in carrying on your enterprise; and

(ii) you do not acquire a thing or import goods for a creditable purpose to the extent that:

(a) the acquisition or importation relates to making supplies that would be input taxed; or

(b) the acquisition or importation is of a private or domestic nature.

When an acquisition or importation is partly creditable because it is only partly for a creditable purpose, the amount of input tax credit to which you are entitled depends on the extent of creditable purpose expressed as a percentage of the total purpose of the acquisition or importation.

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