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Subject: The application of luxury car tax and goods and services tax on the purchase of a car for a disabled war veteran

Question 1

What is the correct calculation of GST and LCT on the purchase of the motor vehicle?

Answer

The correct amount of GST is XXXX.

The correct amount of LCT is XXXX.

Question 2

Can you fit accessories from a different supplier after the vehicle has been purchased?

Answer

Yes, but accessories are not GST-free.

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

You are a veteran.

You require a larger than standard motor vehicle to enable safe entry and exit through the vehicle's door.

You purchased a motor vehicle that will be easier for you to drive.

The motor vehicle is a base model vehicle and is not specifically fitted-out for transporting a person with a disability.

The car dealer charged you Goods and Services Tax (GST) and Luxury Car Tax (LCT).

You have reached different figures based on your own calculations.

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999 Section 5-20 and

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-P.

Reasons for decision

Question 1

Detailed reasoning

Under subdivision 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the supply of a car is GST-free if the supply is to a veteran who has served in the Australian Defence Force or any other Commonwealth armed force and as a result of that service:

· has lost a leg or both arms; or

· had a leg or both arms, rendered permanently and completely useless; or

· is a veteran to whom section 24 of the Veterans' Entitlements Act 1986 applies and receives a pension under Part II of that Act; or

· totally and permanently incapacitated (TPI) pension

· is receiving a Special Rate Disability Pension under Part 6 of Chapter 4 of the Military Rehabilitation and Compensation Act 2004, or satisfies the eligibility criteria in section 199 of that Act; and

· intends to use the car in his or her personal transportation during all of the subdivision 38-P period.

Under section 195-1 of the GST Act the subdivision 38-P period, in relation to the supply of a car to an individual, means the period starting when he or she acquires it and ending at the earliest of the following:

(a) the end of 2 years after the acquisition;

(b) the time when the car is no longer reasonably capable of being used for the purpose for which cars of that kind are ordinarily used;

(c) a time that the Commissioner considers to be appropriate in special circumstances.

You are a veteran with a disability and intend to use the car for more than two years; hence, you qualify for the GST-free purchase of a car.

If you are an eligible veteran or disabled person and you buy a car, you do not have to pay GST unless the value of the car exceeds the LCT threshold.

However, you must pay both GST and LCT on the value above that threshold. The threshold for the 2011-2012 financial year is $57,466.

Under subsection 5-20(1A) of the A New Tax System (Luxury Car Tax) Act 1999, if the supply of a car is GST-free because of subdivision 38-P of the GST Act, the LCT value of the car includes an amount equal to the amount of GST that was not payable because of subdivision 38-P.

So, in your situation, you would work out the GST and LCT payable on the purchase of the motor vehicle as thus:

1. Calculate the LCT value:

Value of the car + GST

2. Calculate the amount that is above the LCT threshold

LCT value - LCT threshold

3. Exclude the GST included in the amount above the LCT threshold

4. Calculate the GST payable by multiplying the previous amount x 10%

5. Calculate 33% of the amount above the LCT threshold, less GST

The total amount you are required to pay is thus:

Value of the car + GST + LCT

This does not include the registration fee or the compulsory third party fee, both of which are additional to this figure.

Question 2

Detailed reasoning

After purchasing the motor vehicle, you are able to fit accessories to your liking from any suppliers you wish to purchase from. However, accessories are not GST-free. Accessories include, but are not limited to, spoilers, mudflaps, pin striping, roof racks and CD players.

Under subsection 38-505 paragraph (4) of the GST Act, car parts are GST-free if the purchaser is eligible for the GST-free purchase of a car under subdivision 38-P. As it is already determined that you are eligible for the GST-free purchase of a car, you can also purchase car parts GST-free. Car parts include items such as batteries, disk brake pads, tyres, oil filters, petrol filters, spark plugs and windscreens.

When purchasing car parts GST-free, you must present to the supplier a completed Declaration for an exemption of GST on a car or car parts - disabled veterans form (NAT 3418). The purchase of accessories, however, is not GST-free and does not require the completion of this form.