Edited version of private ruling

Authorisation Number: 1011673720723

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Ruling

Subject: Luxury Car Tax

Question:

Is this vehicle considered to be a luxury car for the purposes of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)?

Answer:

Yes. This vehicle is considered to be a luxury car for the purposes of the LCT Act.

Relevant facts and circumstances

· You are registered for GST and LCT.

· You will supply motor vehicles to a fleet purchaser, who will purchase them on behalf of a government department.

· The type of vehicle to be supplied is a four wheel drive.

· The base of the vehicle to be supplied is a utility chassis, but has a passenger vehicle superstructure built on top of this base.

· The vehicle being supplied is retailed as a passenger vehicle, with a carrying capacity of five occupants.

· You have described the physical shape of the vehicle as a "wagon", and you have designated this type of vehicle is a troop carrier.

· The vehicle has a tare weight of 2,230 kg and GVM of 3,000 kg.

· The GST inclusive price of the vehicle is over $57,466 in the 2010/11 financial year.

Reasons for decision

Subsection 25-1(1) of the LCT Act provides that a luxury car is a car whose luxury car tax value exceeds the luxury car tax threshold. The LCT threshold is $57,466 for the 2010/11 income tax year.

Pursuant to section 27-1 of the LCT Act a car is 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 nine passengers; or

· a limousine (regardless of the number of passengers it is designed to carry).

Section 27-1 of the LCT Act also provides that a motor vehicle means a motor-powered road vehicle (including a 4 wheel drive vehicle).

Paragraph 25-1(2)(c) of the LCT Act provides that 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. These vehicles include trucks, hearses and some vans. 

Vehicles designed for the principal purpose of carrying passengers (including paying passengers), or for sport or recreation purposes, are not commercial vehicles. These vehicles include station wagons, passenger sedans, people movers, and sports utility vehicles.

To determine whether your supply of this type of vehicle is subject to Luxury Car Tax it is necessary to determine the principal purpose for which the subject vehicles have been designed.

There are several factors that need to be considered when determining the principal purpose for which a vehicle has been designed. These are:

· appearance and presentation of the vehicle;

· relevant promotional material and marketing emphasis;

· specifications of the vehicle;

· load carrying capacity of the vehicle; and

· passenger carrying capacity of the vehicle.

Appearance and presentation

The fact that your model of vehicle has a commercial vehicle chassis rather than a passenger motor vehicle chassis does not automatically assign a commercial purpose to the vehicle. Although your model of motor vehicle has commercial vehicle chassis, the fact that the superstructure of the vehicle is designed to carry passengers rather than a commercial load indicates that it has the appearance and presentation of a passenger vehicle rather than a commercial vehicle designed principally to carry goods. Therefore, the overall appearance and presentation your model of motor vehicle indicates that it is principally designed to carry passengers rather than goods for business or trade.

Promotional material and marketing emphasis

No promotional materials have been supplied for examination.

However, you have stated that your model of vehicle is being retailed as a passenger vehicle, with a carrying capacity of five occupants. Further, you have described the physical shape of the vehicle as a "wagon", and you have designated this type of vehicle is a troop carrier. This also indicates that your model of vehicle is being supplied as a passenger vehicle rather than a commercial vehicle.

Specifications of the vehicle

Your model of vehicle has a utility chassis, but has a passenger vehicle superstructure built on top of this base which is designed to carry five passengers. This type of vehicle has a tare weight of 2,230 kg and GVM of 3,000 kg.

These facts indicate that the vehicles are designed to carry a load of less than two tonnes and up to five passengers. Vehicles with these specifications are defined as cars for the purposes of the LCT Act. There is no evidence that the vehicles are being marketed for their goods carrying capacity. These indicate that your model of vehicle is designed principally for the carrying of passengers in a luxurious level of comfort.

Load carrying capacity and passenger carrying capacity

Vehicles that carry both passengers and goods

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.

The Australian Design Rule 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'."

For more information on Australian Design Rules, visit the Department of Transport and Regional Services website at www.infrastructure.gov.au

For LCT purposes the main purpose of these vehicles depends on the load carrying capacity of a vehicle and whether it is designed to carry mainly passengers or goods.

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.

To work out whether the vehicle is subject to LCT or considered to be primarily for the carriage of goods, Brooke uses the 'Principal Purpose' test which looks at:

1. the appearance and presentation - although it can be used for carrying goods used for business or trade, its appearance and presentation lean towards passenger rather commercial attributes.

2. the marketing and promotional material - these point out that the vehicle is designed for comfort and can be used for sport and leisure activities, as well as to carry goods used for business or trade.

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.

In situations where it would appear that a vehicle is designed for a dual purpose, but overall, the facts including appearance and presentation, marketing and promotional material indicate the 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.

Conclusion:

However, the vehicle series is designed to carry only passengers, and is a motor vehicle for the purposes of section 27-1 of the LCT Act as it is designed to carry a load of less than two tonnes and fewer than nine passengers. As the GST inclusive price of the Toyota land cruiser wagon 78 series is $61,732, it exceeds the LCT threshold is $57,466 for the 2010/11 income tax year.

Therefore the vehicle is considered to be a luxury car for the purposes of the LCT Act.