| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Ruling
Subject: LCT on a particular imported vehicle
Questions
(1) Do you have to pay Luxury Car Tax (LCT) on an imported high value vehicle, if you purchase it at a liquidation auction?
(2) If you sell this vehicle to your client, will you incur an LCT liability?
Decisions
(1) If the vehicle entered for home consumption more than two years ago, you do not have to pay LCT on the vehicle if you purchase it at a liquidation auction.
(2) If the vehicle entered for home consumption more than two years ago and if you sell this vehicle to your client, you will not incur an LCT liability.
Relevant facts and circumstances
• More than two years ago, Dealer X imported a high value vehicle without paying LCT. They sold the vehicle to another dealer without charging LCT. You do not know the name of that dealer.
• That dealer has sold the vehicle to a company. You do not know whether that dealer charged LCT to the company.
• The company has gone into liquidation. The liquidator has organised an auction for this vehicle. You are planning to purchase this vehicle at the auction for about $Y.
• If you succeed in purchasing the vehicle at the auction, you plan to sell the vehicle to one of your clients.
Relevant legislative provisions
A New Tax System (Luxury Car Tax) Act 1999 (LCT Act):
Section 5-10
Section 9-5
Reasons for the decisions
Section 5-10 of the Luxury Car Tax Act provides that;
(1) 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.
(2) However, you do not make a taxable supply of a luxury car if:
(a) The recipient quotes for the supply of the car; or
(b) The car is more than two years old; or
(c) .....
(3) A car is more than two years old at the time of a supply if:
(a) for a car that has not been imported - the car was manufactured more than two years before the time of the supply; or
(b) the car was entered for home consumption more than two years before the time of the supply.
Section 9-1 of the LCT Act provides that in certain circumstances you can quote for a supply or importation of a luxury car and not pay the luxury car tax. This is designed to avoid the luxury car tax becoming payable unless the car is sold or imported at the retail level.
Section 9-5 of the LCT Act provides that:
(1) you are entitled to quote your ABN in relation to a supply of a luxury car or an importation of a luxury car if, at the time of quoting, you have the intention of using the car for one of the following purposes and for no other purpose:
(a) holding the car as trading stock, other than holding it for hire or lease; or
(b) research and development for manufacture of the car; or
(c) exporting the car in circumstances where the export is GST-free under Subdivision 38-E of the GST Act.
When Dealer X sold the car to the other dealer, if the other dealer quoted for it, Dealer X did not incur an LCT liability. You will have to verify this fact.
When the other dealer sold the vehicle to the company, if the company purchased it for its own use, the other dealer incurred an LCT liability on it. The dealer would have charged this amount to the company. You will have to verify this fact from the liquidator of the company.
As per the facts, at the time of the auction of the vehicle, it will be over two years old from the date of entry for home consumption. Therefore, the liquidator will not make a taxable supply of a luxury car.
If you purchase this vehicle at the auction and sell it to your client, as it is over two years old from the date of entry for home consumption, you will not incur an LCT liability on it.
As you have not provided all the necessary facts, we cannot provide precise advice. You will have to verify the exact date of entry of this vehicle for home consumption and the LCT paid at each previous transaction involving this vehicle, if any.