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Edited version of private advice
Authorisation Number: 1012660031254
Ruling
Subject: Meaning of luxury car
Question
Are the five seater and six seater motor vehicles luxury cars under section 25-1 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)?
Advice
1. The five seater motor vehicle is not a luxury car
2. The six seater motor vehicle is a luxury car.
Relevant facts and circumstances
• You are registered for goods and service tax (GST) and luxury car tax (LCT).
• You carry on an enterprise of supplying commercial motors vehicles to businesses
• The selling price of a commercial motor vehicle is in excess of the luxury car tax threshold.
• The gross mass vehicle (GMV) for both the 5 seater and 6 seater is 3265 kgs and the vehicles' unladen mass (UM) is 2573 kgs.
• The Load Capacity for the motor vehicles is 692 kgs and 50% of the Load Capacity is 346kgs. (The Load Capacity is the vehicle carrying capacity, which is the difference between GMV and UM).
• Both vehicles have dual purpose as they can be used to transport goods and passengers.
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 luxury car tax threshold for vehicles (other than the fuel efficient vehicle) for the 2014/2015 financial year is $61,884.
The meaning of 'car' for LCT purpose is outlined in section 27-1 of the LCT Act to mean 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).
The 5 seater and 6 seater motor vehicles have Load Capacity of 692kgs (less than 2 tonnes). The selling price for the vehicle is in excess of the luxury car tax threshold. The vehicles have dual purpose as they can be used to transport goods and passengers Therefore the motor vehicles are cars and they satisfy the meaning of luxury car under subsection 25-1(1) of LCT Act.
However, paragraph 25-1(2)(c) of the LCT Act provides that a car is not a luxury car under subsection 25-1(1) of the LCT Act if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers.
The term 'commercial vehicle' is not defined in the LCT Act and therefore, the ordinary meaning of the words applies. The Macquarie Dictionary (Australia) gives the following meaning to the term 'commercial vehicle':
a vehicle able to carry goods or passengers, and designated for use by businesses, as a panel van, utility, etc.'
The vehicles satisfy the meaning of commercial vehicle as they are sold to businesses and have dual purposes. They are used to carry both passengers and goods. Therefore the next issue is to determine whether the vehicles are designed for the principal purpose of carrying passengers.
The Australian Taxation Office (ATO) view on dual purpose commercial vehicles is discussed in the Class Rulings CR 2012/37 and CR 2012/81. You may also find further information on the meaning of luxury car in the "Luxury Car Tax Guide" publication by searching for QC 16252 in ATO website www.ato.gov.au.
Paragraph 34 of CR 2012/81 outlines the design rules to determine the principal purposes of a vehicle. The paragraph states:
The Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005, (ADR) (The Australian Design Rules) 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'.
Paragraph 64 of CR 2012/81 outlines the methodology based on ADR rules to determine the principal purpose of a dual purpose vehicle. The paragraph states:
Thus, the process to determine whether any of the dual purpose vehicles supplied constitutes a luxury car is as follows:
• determine whether the LCT value of the vehicle exceeds the LCT threshold. If so;
• calculate the difference between the gross vehicle mass and the un-laden mass of the vehicle in kilograms and then calculate 50% of that difference;
• calculate the total passenger weight by multiplying the total seating capacity including the driver by 68kg;
• determine whether the total passenger weight exceeds 50% of the difference between the gross vehicle mass and the un-laden mass;
• if so, the principal purpose of the vehicle is to carry passengers and it is a luxury car within the meaning of section 25-1; and
• If not, the principal purpose of the vehicle is for the carriage of goods and it is not a luxury car within the meaning of section 25-1.
Based on the above methodology and information provided, it is considered that the 5 seater vehicle is designed for carrying goods. The total passenger weight (5 x 68kgs) is less than 50% of the vehicle's Load Capacity. Paragraph 25-1(2)(c) of the LCT Act excludes the 5 seater vehicle from the meaning of luxury car under subsection 25-1(1) of the LCT Act.
The six seater vehicle is a luxury car as its principal purpose is for carrying passengers. The exclusion paragraphs in subsection 25-1(2) of the LCT Act do not apply.