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Edited version of your written advice
Authorisation Number: 1051215236119
Date of advice: 19 April 2017
Ruling
Subject: Whether the Vehicle is a luxury car, and whether it is subject to the car limit.
Question 1
Is the Vehicle considered a commercial vehicle that is not designed for the principal purpose of carrying passengers and therefore is not a luxury car under section 25-1 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)?
Answer
Yes
Question 2
Is the Vehicle exempt from the car limit under section 40-230 of the Income Tax Assessment Act 1999 (ITAA 1997)?
Answer
Yes
This ruling applies for the following periods:
1 July 2012 to 30 June 2013
1 July 2013 to 30 June 2014
1 July 2014 to 30 June 2015
1 July 2015 to 30 June 2016
1 July 2016 to 30 June 2017
1 July 2017 to 30 June 2018
1 July 2018 to 30 June 2019
1 July 2019 to 30 June 2020
1 July 2020 to 30 June 2021
1 July 2021 to 30 June 2022
1 July 2022 to 30 June 2023
The scheme commences on:
1 July 2012
Relevant facts and circumstances
● The taxpayer purchased the Vehicle, which is a dual cab utility.
● The Gross Vehicle Mass (GVM) of the Vehicle is 3,040kg.
● The unladen mass of the Vehicle is 2,101kg.
● The payload of the Vehicle is 939kg.
● The Vehicle can carry five passengers (including the driver).
● The GST inclusive price of the vehicle is above the luxury car tax threshold.
● The Vehicle is advertised as a commercial vehicle in the car company's Commercial Vehicles brochure.
Relevant legislative provisions
A New Tax System (Luxury Car Tax) Act 1999 section 25-1,
A New Tax System (Luxury Car Tax) Act 1999 section 27-1(a),
Income Tax Assessment Act 1997 section 40-230 and
Income Tax Assessment Act 1997 section 995-1.
Reasons for decision
Question 1
Summary
The Vehicle is not considered to be a luxury car for the purposes of the LCT Act as the main purpose of the Vehicle is to carry goods, thus making it a commercial vehicle that is not designed for the principal purpose of carrying passengers under paragraph 25-1(2)(c) of the LCT Act.
Detailed reasoning
Subsection 25-1(1) of the LCT Act provides the meaning of a luxury car as a car whose car tax value exceeds the luxury car tax threshold.
Section 27-1(a) of the LCT Act as defines a 'car' as 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. The Vehicle has a payload of 939kg and has capacity for 5 passengers. Therefore, the Vehicle is a car for the purposes of the LCT Act.
The taxpayer purchased the Vehicle at a price above the luxury car tax threshold.
Paragraph 25-1(2)(c) of the LCT Act provides that a car will not be a luxury car if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers.
The meaning of commercial vehicle is discussed in Class Ruling CR 2012/81 (CR 2012/81). As 'commercial vehicle' is not defined in the LCT Act, the ordinary meaning of the words applies. The definition given to 'commercial vehicle' in the Macquarie Dictionary (Australia) is a:
'vehicle able to carry goods or passengers, and designated for use by businesses, as a panel van, utility, etc.'
CR 2012/81 and the ATO publication, Luxury car tax: Guide for taxpayers with a luxury car tax obligation NAT 3394 (the Guide), provide guidance on how to determine the principal purpose for which a vehicle has been designed for (the principal purpose test).
Relevant considerations are:
● The appearance and presentation of the vehicle;
● Relevant promotional material and how it is marketed;
● Its specifications;
● The load carrying capacity;
● The number of passengers it can carry.
Appearance and presentation
The Vehicle is a dual cab utility.
Relevant promotional material and how it is marketed
The Vehicle range is advertised in the car company's Commercial Vehicles brochure, demonstrating that it is sold as a commercial vehicle.
Specifications
The GVM of the Vehicle is 3,040kg and it has an unladen mass of 2,101kg. It has a braked towing capacity of 3,000kg and an unbraked towing capacity of 750kg.
Load carrying capacity and number of passengers
Dual purpose
Page 6 of the Guide provides that some vehicles with a load carrying capacity of less than two tonnes, such as dual cab vehicles, can be designed for the purposes of carrying both passengers and goods. The Vehicle in this case is one of these vehicles and thus has a dual purpose.
In these circumstances, the Guide provides that the calculation given by the Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005 (ADR) can be used to determine the principal purpose. This calculation provides that a vehicle will be considered to be constructed for primarily carrying goods if the number of seats multiplied by 68kg is less than 50% of the difference between the GVM and the unladen mass.
The Vehicle in this case can carry five passengers, meaning the passenger carrying capacity is 340kg (5 passengers x 68kg). The vehicle has a GVM of 3,040kg and an unladen mass of 2,101kgs, with 50% of the difference being 469.5kg (50% x 939kg). Therefore, as the passenger weight is less than 50% of the remaining goods capacity, the Vehicle has a principal purpose of carrying goods.
Conclusion
In considering the above factors, the Vehicle is considered to be a commercial vehicle that is not designed for the principal purpose of carrying passengers and is therefore not a luxury car under section 25-1 of the LCT Act.
Question 2
Summary
The Vehicle is exempt from the car limit under section 40-230 of the ITAA 1997 as it is not a car designed mainly for carrying passengers as required under subsection 40-230(1) of the ITAA 1997.
Detailed reasoning
Subsection 40-230(1) of the ITAA 1997 states that:
The first element of the cost of a car designed mainly for carrying passengers (after applying section 40- 225 and Subdivision 27-B) is reduced to the car limit for the financial year in which you started to hold it if its cost exceeds that limit.
'Car' is defined under section 995-1 of the ITAA 1997 as a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers. The Vehicle has a payload of 939kg and has capacity for 5 passengers. Therefore, the Vehicle is a car for the purposes of the ITAA 1997.
A car that is not mainly designed for carrying passengers will not be subject to the car limit under section 40-230 of the ITAA 1997.
As per the reasoning in Question 1, taking into consideration: the appearance and presentation of the Vehicle; relevant promotional and marketing material; the specifications; the load carrying capacity; and the number of passengers the Vehicle can carry, the Vehicle is not a car designed mainly for carrying passengers.
Conclusion
The Vehicle is exempt from the car limit under section 40-230(1) of the ITAA 1997 as it is not a car designed mainly for carrying passengers.