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Edited version of private ruling
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Ruling
Subject: Luxury Car Tax
Question:
Are you liable to pay luxury car tax on a vehicle that has had the back seats and belting removed by the dealership prior to purchase?
Advice/Answers:
Yes. You will be liable to pay luxury car tax on a vehicle if the value of the vehicle exceeds the luxury car tax threshold.
Relevant facts:
You intend to purchase a vehicle from a dealer.
Prior to acquiring and registering the vehicle you intend to have the rear seats and belting removed by the dealership.
You will be personally lining out the back with timber boards on the floor and sides that are carpeted.
The vehicle will be used to carry building materials and tools of trade which include sheets of plaster and even carting rubbish.
Reasons for Decision:
Summary:
If the value of the vehicle exceeds the luxury car tax threshold, you will be liable for luxury car tax because the vehicle by design is a car for the purposes of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), and the intended changes are not permanent changes that would affect the design of the vehicle.
Detailed reasoning:
Section 5-5 of the LCT Act states:
You must pay the luxury car tax payable on any *taxable supply of a luxury car that you make.
Subsection 5-10 (1) of the LCT Act states:
You make a taxable supply of a luxury car if:
(a) you supply a *luxury car; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.
*To find definitions of asterisked terms, see the Dictionary, in section 27-1.
Section 25-1 of the LCT Act provides the meaning of a luxury car as a car whose luxury car tax value exceeds the luxury car tax threshold.
This section also states that a car is not a luxury car if it is an emergency vehicle, a vehicle fitted out for transporting disable people seated in wheelchairs, a commercial vehicle that is not designed for the principal purpose of carrying passengers or a motor home or campervan.
Section 27-1 of the LCT Act states:
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).
Section 27-1 of the LCT defines a motor vehicle as "a motor-powered road vehicle (including a 4 wheel drive vehicle)".
The LCT Act does not provide a definition for a motor powered road vehicle, however section 5 of the Motor Vehicle Standards Act 1989, provides guidance with a definition of a road motor vehicle which states:
"road motor vehicle" means:
(a) a motor vehicle designed solely or principally for the transport on public roads of people, animals or goods; or
(b) a motor vehicle that is permitted to be used on public roads.
In your case you intend to purchase a vehicle. Prior to making this purchase you intend to have the rear seats and belting removed. After purchase, you intend to make further changes to the vehicle in order to use it for your business.
Miscellaneous Taxation Ruling MT 2033 Fringe benefits tax: application of sub-section 8(2) exemption to modified cars (MT 2033) provides guidance on design and modification of vehicles. This ruling states at paragraph 7 that:
"… a vehicle's design is generally established at the time of manufacture. In order to change that design it would be necessary that modifications effect a permanent alteration to the vehicle".
MT 2033 further provides at paragraph 9, that to effect a permanent alteration to the vehicle, as a general rule, this would be satisfied where they are not capable of being readily reversed such that the car could, if required, be used alternatively as a passenger or non passenger car on a regular basis.
The Luxury Car Tax guide (LCT guide) states that a car includes passenger cars, station wagons, four-wheeled vehicles and limousines. It does not include trucks and vans designed to carry a load of more than two tonnes, vehicles and buses designed to carry nine or more passengers, motor cycles or similar vehicles, racing or rally cars.
The LCT guide further states that a commercial vehicle is a vehicle designed for the principal purpose of carrying goods used for business or trade and not subject to luxury car tax.
Vehicles designed mainly for carrying passengers (including paying passengers) or for sport or recreation purposes are not commercial vehicles. These include station wagons, passenger vehicles, people movers and sport utility vehicles.
So in order to determine whether the vehicle you intend to purchase is subject to luxury car tax, it needs to be determined what the vehicle was designed for and whether the intended modifications change the design of the vehicle.
The first issue to be addressed is the design of the vehicle.
The internet promotes the vehicle as a people mover.
The main features of the vehicle indicate that it is designed primarily to carry passengers. It has seats, airbags and air conditioning for rear passengers. The rear seats have integrated seat belts and are designed to be removed from vehicle.
From the description and the way the vehicle is marketed; it is a motor vehicle which is designed to carry a load of less than two tonnes and fewer than nine passengers. Also, the vehicle description is consistent with the definition of a road motor vehicle, in that its main function relates to transportation on and is permitted to be used on public roads.
The Luxury Car Tax guide states that a commercial vehicle is:
a vehicle designed for the principal purpose of carrying goods used for business or trade; and not subject to GST.
From the facts detailed above, the vehicle is not designed as a commercial vehicle but a passenger car.
The modifications you intend to make prior to acquisition are removal of the rear seats and seat belts. The vehicle by design can have the rear seats removed and replaced. The rear seats have integrated seat belts. As such, the vehicle can readily be used as a passenger and non passenger vehicle by removing/replacing the rear seats.
In summary, the vehicle is a motor vehicle designed to carry less than two tonnes and fewer than nine passengers. The principal purpose of the design of the vehicle is to carry people not goods therefore not a commercial vehicle. The intended modifications prior to supply of the vehicle do not effect a permanent alteration to the vehicle.
The vehicle is not an emergency vehicle, fitted for transport disable people seated in wheelchairs, a commercial vehicle or a motor home or campervan.
Therefore, the vehicle is a car for the purposes of the LCT Act. If the value of the vehicle exceeds the luxury car tax threshold, it will be a luxury car and subject to luxury car tax.