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Edited version of your written advice
Authorisation Number: 1012973128059
Date of advice: 3 March 2016
Ruling
Subject: Luxury Car Tax
Question 1
Does the dual cab utility vehicle meet the definition a luxury car for the purpose of section 25-1 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)?
Answer
No, the dual cab utility vehicle does not meet the definition of a luxury car for the purpose of section 25-1 of the LCT Act as the vehicle is a considered a commercial vehicle.
Relevant facts and circumstances
The entity (You) is a dealer with a motor vehicle franchise.
You hold in your trading stock a new vehicle which you intend to modify, via a third party company, into a dual cab utility vehicle with a goods carrying capacity of 1,000kg and seating capacity of 5 passengers (including the driver).
The third party company holds a Federal Licence for Second Stage Manufacturing and will carry out the modification within the Australian Design Rules.
You intend to sell and register (after the modifications) the dual cab utility vehicle.
Relevant legislative provisions
A New Tax System (Luxury Car Tax) Act 1999 section 5-5,
A New Tax System (Luxury Car Tax) Act 1999 paragraph 25-1(2)(c) and
A New Tax System (Luxury Car Tax) Act 1999 section 27-1.
Reasons for decision
Under section 5-5 of the LCT Act, LCT is payable on any taxable supply of a luxury car.
Paragraph 25-1(2)(c) of the LCT Act provides the definition of a luxury car and states:
25-1 Meaning of luxury car
(1) A luxury car is a *car whose *luxury car tax value exceeds the *luxury car tax threshold.
(2) However, a *car is not a *luxury car if it is:
(a) a vehicle that is specified in the regulations to be an emergency vehicle, or that is in a class of vehicles that are specified in the regulations to be emergency vehicles; or
(b) specifically fitted out for transporting *disabled people seated in wheelchairs (unless the supply of the car is *GST-free under Subdivision 38-P of the *GST Act); or
(c) a commercial vehicle that is not designed for the principal purpose of carrying passengers; or
(d) a motor home or campervan.
{Emphasis added.} (Items marked with an * are defined in the dictionary at section 27-1 of the LCT Act).
According to section 27-1 of the LCT Act a car is defined as follows:
car means a *motor vehicle (except a motor cycle or similar vehicle) that is:
(a) designed to carry a load of less than 2 tonnes and fewer than 9 passengers; or
(b) a limousine (regardless of the number of passengers it is designed to carry).
motor vehicle means a motor-powered road vehicle (including 4 wheel drive vehicles).
The dual cab utility vehicle is a motor-powered road vehicle with a 5 seater capacity and is designed to carry a load of 1 tonne. As such the dual cab utility vehicle would fall within the definition of a car for the purpose of the LCT Act.
Under paragraph 25-1(2)(c) of the LCT Act a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers.
On the subject of whether a vehicle is a commercial vehicle that is not designed for the principal purpose of carrying passengers, the ATO publication on www.ato.gov.au (LCT Guide) provides the following guidelines:
For LCT purposes, a commercial vehicle is:
● designed for the principal purpose of carrying goods used for business or trade
● not subject to LCT.
These vehicles include:
● trucks
● hearses
● some vans, for example vans designed to carry a load of less than two tonnes, fewer than nine passengers and have a value over the LCT threshold.
Vehicles designed mainly for carrying passengers (including paying passengers), or for sport or recreation purposes, are not commercial vehicles and you may have to pay LCT on them.
These vehicles include:
● station wagons
● passenger sedans
● people movers
● sports utility vehicles (SUVs).
To work out the main purpose (principal purpose) for which a vehicle has been designed, see Miscellaneous Taxation Ruling MT2024.
Paragraphs 14 to 16 of the Miscellaneous Taxation Ruling MT2024 detail the method to determine whether the principal purpose of a vehicle is for carrying passengers and the relevant extracts state the following:
14. It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. This approach is consistent with that adopted under the Australian Design Rules in determining what is a passenger vehicle.
15. For this purpose the designed passenger carrying capacity is to be determined by multiplying the designed seating capacity (including the driver’s) by 68 kg, which is the figure adopted for the purpose of the application of the Australian Design Rules.
16. If the total passenger weight so determined exceeds the remaining “load” capacity, the vehicle is to be treated as being designed for the principal purpose of carrying passengers.
This principal when applied to the specifications of the dual cab utility vehicle yields the following result:
● the load capacity (GVM – unladen vehicle mass) is 1,000kg
● the passenger capacity for 5 passengers (including the driver) is 5 x 68kg = 340kg
● the remaining load capacity is 1,000kg – 340kg = 660kg
As the passenger capacity (340kg) does not exceed the remaining load capacity (660kg), the dual cab utility vehicle is treated as not being designed for the principal purpose of carrying passengers.
As such, the dual cab utility vehicle is not a luxury car for the purpose of the LCT ACT because it is a commercial vehicle designed for the principal purpose of carrying goods.
The sale of the dual cab utility vehicle is not a sale of a luxury car and therefore is not subject to LCT.