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Subject: Luxury Car Tax

Question

Are the vehicle classes mentioned in your ruling request considered to be 'luxury cars' for the purposes of section 25-1 of the LCT Act?

Answer

No, the vehicle classes mentioned in your ruling request are not considered to be 'luxury cars' for the purposes of section 25-1 of the LCT Act.

Relevant facts and circumstances

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.

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.

Section 27-1 of the LCT Act provides that a car means a motor vehicle (except a motor cycle or similar vehicle) that is designed to carry a load of less than 2 tonnes and fewer than 9 passengers or a limousine (regardless of the number of passengers it is designed to carry).

You informed us that the listed vehicles are designed to carry a load of less than two tonnes and five passengers. Therefore, it needs to be determined whether the vehicles have a dual purpose.

The Guide for Taxpayers with a Luxury Car Tax Obligation NAT 3394 (Guide) provides the ATO view on the application of the LCT provisions. NAT 3394 mentions that some vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and goods (that is a dual purpose). These vehicles include

§ dual cab vehicles

§ crew cab vehicles, and

§ utility vehicles.

The term "commercial vehicle" is not defined in the LCT Act. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning. The Macquarie Dictionary (1997) defines 'commercial vehicle' to mean:

a vehicle able to carry goods or passengers, and designated for use by businesses, as a panel van, utility, etc

The Australian Taxation Office view on the application of the LCT Act to dual purpose vehicles supplied before and from 1 July 2011 is described below.

For LCT purposes, the designed passenger carrying capacity of a vehicle has to be determined by multiplying the designed seating capacity (including the driver's) by 68kg, which is the figure adopted for the purposes of the application of the Australian Design Rules.

The Australian Design Rules Definitions and Vehicle Categories states 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'.

From the information provided, it can be concluded under the Australian Design Rules that these three classes of vehicles can be considered to be primarily for the carriage of goods. The Tax Office has determined that each of the models listed in the facts does not constitute a luxury car and is therefore not subject to LCT.

Relevant legislative provisions

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

A New Tax System (Luxury Car Tax) Act 1999 (LCT Act) - Section 27-1