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Edited version of your written advice
Authorisation Number: 1051422715823
Date of advice: 5 September 2018
Ruling
Subject: Luxury car tax
Question
Is luxury car tax payable on the importation of a Race Car that was specifically built to compete in racing events since manufactured until now, and will continue to be entered into racing and rally events in the future?
Answer
No
This ruling applies for the following period:
20XX – 20XX income year
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are registered for goods and services tax.
You imported a Race Car into Australia and have since entered the Race Car in various racing events.
The Race Car was manufactured specifically to be a racing car and it has been used exclusively in racing events since then. You have provided information that evidences the extensive racing history of this car.
The Race Car is currently being prepared for racing in Australia and internationally by a Company that specialises in restoration, maintenance and preparation of historic racing cars. The company has confirmed that the Race Car is for race track use only.
You further advised that all modifications to the Race Car were designed to maximise performance in a racing environment. Further, the Race Car was designed for a driver and a navigator only and is not designed to carry additional passengers or cater for personal items.
Relevant legislative provisions
A New Tax System (Luxury Car Tax) Act 1999 section 7-5,
A New Tax System (Luxury Car Tax) Act 1999 section 25-1 and
A New Tax System (Luxury Car Tax) Act 1999 section 27-1.
Reasons for decision
The liability for luxury car tax (LCT) arises when a taxpayer makes an importation of a luxury car, under section 7-5 of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act). An exception to this rule is if the vehicle imported is not a luxury car within the LCT Act.
What is a luxury car?
Section 25-1 defines ‘luxury car’ as:
a car whose luxury car tax value exceeds the luxury car tax threshold.
Section 27-1 of the LCT Act defines ‘car’ as:
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)
In turn, ‘motor vehicle’ is defined to mean:
a motor-powered road vehicle (including a 4 wheel drive vehicle)
As the vehicle is motor-powered and designed to carry a load of less than 2 tonnes and fewer than 9 passengers, the issue then is whether the vehicle is a ‘road vehicle’.
What is the meaning of ‘road vehicle’?
‘Road vehicle’ is not defined in the LCT Act. However, guidance could be drawn from the Goods and Services Tax Advice GSTA TPP 077 (‘ATO Ruling’) which explored the definition of a ‘car’ and, relevantly, ‘motor vehicle’ for the purposes of input tax credit claims.
The ATO Ruling referred to paragraph 3.2 of the Sales Tax Ruling SST 13 which stated the following:
The term 'road vehicle' refers to the class of vehicle, not to the actual use to which a particular vehicle may be put. It is a road vehicle if it is in a class of vehicle that is designed for use on public roads and it would be a road vehicle even though it may never be used or registered for use on public roads.
Reference to the class of vehicle is further elaborated in the ATO Ruling accordingly:
If the nature and fundamental design of a vehicle used as a rally or racing car, including any modifications or add-ons, makes it of a class of vehicle suitable and capable of being registered for use on public roads, anywhere in the world, it is a 'car' as defined... For example, where a standard passenger car is modified for rallying or racing and the modifications do not extend to changing its fundamental design, it will remain a car.
If the rally car or racing car, including any modifications or add-ons, is of a class of vehicle designed to be used only on racing or rally circuits or off-road, and is not capable of being registered for use on public roads, it is not a 'car' as defined…For example, where a racing car is designed and built from the ground up, or a standard passenger car is redesigned, stripped and rebuilt so that nature and fundamental design of the vehicle makes it incapable of being registered for use on public roads, it is not a ‘car’ as defined.
Is the Race Car a ‘luxury car’?
The Race Car was specifically manufactured to be a racing car which is evidenced by its design and modifications. Contrary to the design of road cars, the Race Car was designed for a driver and a navigator only and did not have features to carry additional passengers or cater for personal items. All modifications done to the car were also specifically made to maximise performance in a racing environment.
The Race Car has had various owners and maintained a strong racing history. Supporting information provided further verified the Race Car’s success in the various racing events it competed in since its manufacture.
The Race Car continued to compete in various vintage races prior to and after its importation into Australia.
The Race Car is currently being prepared for racing in Australia and Internationally by a Company that specialises in restoration, maintenance and preparation of historic racing cars. The company has confirmed that the Race Car is for race track use only.
Accordingly, the Race Car falls within the class of vehicle designed to be used only on racing tracks, and is not capable of being registered for use on public roads. As such it is not a ’car‘ under section 27-1 of the LCT Act and therefore not subject to LCT.