Edited version of your written advice

Authorisation Number: 1012733687648

Ruling

Subject: LCT and agreement with Commissioner regarding calculation of LCT values

Question 1

1. Are accessories included in the luxury car tax value of a car for the purposes of section 5-20(3) of the A New Tax System (Luxury Car Tax) Act 1999 (Cth) (LCT Act) where they are supplied or paid for at the time of the supply of the vehicle to which they relate or supplied under an arrangement with the supplier or an associate of the supplier made at or before the end supply of the vehicle?

Answer

1. Yes.

Question 2

2. Does the Commissioner have the power to enter into an industry-wide agreement under section 21-10 of the LCT Act providing for the exclusion of certain accessories from the calculation of the luxury car tax value of a car where the value of those accessories would otherwise be included in the luxury car tax value pursuant to subsection 5-20(3) of that Act?

Answer

2. No.

Question 3

3. Does the Commissioner have the power to enter into an agreement with an entity under section 21-10 of the LCT Act providing for the exclusion of certain accessories from the calculation of the luxury car tax value of a car where the value of those accessories would otherwise be included in the luxury car tax value pursuant to section 5-20(3) of that Act?

Answer

3. No.

Relevant facts and circumstances

An entity offers a range of accessories which are designed and engineered to operate as fully integrated parts of a vehicle.

The use of the accessories ensures that vehicles continue to operate within their safety parameters and tolerances.

Many after-market accessories sold for use on vehicles cause vehicles to operate outside vehicle safety parameters and tolerances due to their design process and the speed at which manufacturers rush them to the market.

The entity advises that accessories, supplied at or before the time of the end supply of a car would be included in the LCT value and that this would lead to a different tax treatment for its accessories. The consequence of which according to the entity will provide a more favourable tax treatment for products that are unsafe and in many cases non-compliant with the Australian Design Rules where those non-genuine accessories would be applied after the supply of the car by the entity.

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999 (Cth) subsection 5-20(1)

A New Tax System (Luxury Car Tax) Act 1999 (Cth) subsection 5-20(3)

A New Tax System (Luxury Car Tax) Act 1999 (Cth) subsection section 21-10

A New Tax System (Luxury Car Tax) Act 1999 (Cth) subsection section 27

Reasons for decision

Question 1

Summary

Yes, accessories are included in the luxury car tax value of a car for the purposes of subsection 5-20(3) of the LCT Act where they are supplied or paid for at the time of the supply of the vehicle to which they relate or supplied under an arrangement with the supplier or an associate of the supplier made at or before the end supply of the vehicle.

Detailed reasoning

Section 5-20 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), is about the 'luxury car tax value' of a car.

Subsection 5-20(1) of the LCT Act provides that the luxury car tax value is the price of the car excluding:

• any luxury car tax for that supply; and

• any other Australian tax, fee or charge, other than GST and customs duty payable on the supply.

Further, subsection 5-20(3) of the LCT Act provides that the luxury car tax value of a car includes the price of all supplies in relation to the car that are made to, or are paid for by, the recipient of the car and that are:

• made before the end supply of the car; or

• made under an arrangement with the supplier of the car, or with an associate of the supplier, at or before the time of the end supply of the car.

Section 27-1 of the LCT Act defines 'end supply' of a car to mean a supply of a car to a recipient who is not entitled to quote in relation to that supply.

Where a customer is not entitled to quote for LCT purposes, the end supply of a car occurs when the car is delivered to the customer.

Where an entity was instructed by the customer to arrange for the supply and fit the entity's accessories to the luxury car before delivery, then the supply of the entity's accessories is a supply made in relation to the car before the entity delivers the car to its customer. As such, the costs associated with the supply of the entity's accessories and its installation are included in the 'luxury car tax value' according to subsection 5-20(3) of the LCT Act.

Question 2

Summary

No, the Commissioner does not have the power to enter into an industry-wide agreement under section 21-10 of the LCT Act providing for the exclusion of certain accessories from the calculation of the luxury car tax value of a car where the value of those accessories would otherwise be included in the luxury car tax value pursuant to subsection 5-20(3) of that Act.

Detailed reasoning

Section 21-10 of the LCT Act states the following:

21-10 Agreement with Commissioner regarding calculation of luxury car tax values

(1) The *Commissioner may enter into an agreement with you about calculating the *luxury car tax values of particular supplies or *importations of *luxury cars.

(2) So far as the agreement is inconsistent with this Act, the agreement prevails.

Asterisked terms are defined in the Dictionary at section 27-1 of the LCT Act.

Under section 21-10 of the LCT Act the Commissioner may enter into an agreement about calculating the LCT values of particular supplies or importations of luxury cars.

In other words section 21-10 of the LCT Act allows the Commissioner to enter into an agreement to determine a method of calculating the LCT value for particular supplies or importations of luxury cars.

Calculate' is defined in the Macquarie Dictionary as 'to ascertain by mathematical methods; compute'.

The MacMillan Dictionary online gives a slightly more expansive definition along similar lines:

1 to discover a number or amount using mathematics or with a piece of equipment such as a calculator

We'll need to calculate the overall costs.

calculate (that):

He calculates that the proposal would cost £4 million a year.

calculate how/what:

The program helps you to calculate how much tax you have to pay.

We take the view that applying the ordinary meaning of 'calculating' indicates that an agreement under section 21-10 of the LCT Act can only be entered into for the purposes of determining an alternative mathematical methodology to work out the LCT value. It may be appropriate to use such an agreement where there are real difficulties in working out the LCT value. However, it would not seem appropriate or consistent with the statutory context to use an agreement to simply disregard part of the price from the calculation.

We understand that the Commissioner will enter into such agreements in accordance with the terms of the legislation. In the present case the LCT value of the cars in question can adequately be determined under the usual statutory provisions.

Therefore, for the reasons given above, the Commissioner does not have the power to enter into an industry-wide agreement in the fact situation set out above.

Question 3

Summary

No, the Commissioner does not have the power to enter into an agreement with an entity under section 21-10 of the LCT Act providing for the exclusion of certain accessories from the calculation of the luxury car tax value of a car where the value of those accessories would otherwise be included in the luxury car tax value pursuant to section 5-20(3) of that Act.

Detailed reasoning

For the reasons given in the answer to question 2 the Commissioner does not have the power to enter into an agreement with an entity under section 21-10 of the LCT Act providing for the exclusion of certain accessories from the calculation of the luxury car tax value of a car where the value of those accessories would otherwise be included in the luxury car tax value pursuant to section 5-20(3) of that Act.