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Edited version of private advice
Authorisation Number: 1051627889280
Date of advice: 29 January 2020
Ruling
Subject: Luxury car tax
Question
Is the dual cab utility vehicle a commercial vehicle for the purpose of the A New Tax System (Luxury Car Tax) Act 1999?
Answer
Yes
This ruling applies for the following periods:
2019-20 income year
2020-21 income year
2021-22 income year
2022-23 income year
The scheme commences on:
1 July 2019
Relevant facts and circumstances
You are registered for Goods and Services Tax (GST).
You convert a station wagon into a dual cab utility vehicle.
As part of the conversion, the vehicle's body is permanently modified to remove the rear half and have a load carrying area fitted, e.g. tray body with load restraints. The vehicle is converted to 5 seat dual cab utility vehicle and will be used primarily for trade and commercial purposes.
The vehicle's gross vehicle mass (GVM) will also be increased and the load carrying capacity will exceed person carrying capacity.
You provided a photo to show the externals of the converted vehicle.
The Vehicle category is changed to NB1 medium goods carrying vehicle under the Australian Design Rules.
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
Reasons for decision
In determining whether the dual cab utility vehicle is subject to luxury car tax (LCT), it will need to fall within the definition of a luxury car under the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act).
Section 25-1 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.
Item marked with an * are defined in the dictionary at section 27-1 of the LCT Act.
Section 27-1 of the LCT Act defines a car is 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 has a load carrying capacity of less than 2 tonnes, and thus would fall under the definition of a car for the purposes of the LCT Act.
The vehicles would fall under the definition of a luxury car if its LCT value is above the LCT thresholds. However, 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.
For LCT purposes, the Commissioner considers a commercial vehicle is:
· designed for the principal purpose of carrying goods used for business or trade
· not subject to LCT
Commercial 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 may have luxury car tax payable for them. These vehicles include:
· station wagons
· passenger sedans
· people movers
· sport utility vehicles (SUVs)
To work out the main purpose (principal purpose) for which a dual cab utility vehicle has been designed, see Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: Dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel.
Paragraphs 14 to 16 of the MT 2024 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...
Applying the principle above to the specifications of the dual cab utility vehicle, the passenger capacity of 340kg (5 x 68kg) did not exceed the remaining load capacity, and so the dual cab utility vehicle is treated as not being designed for the principal purpose of carrying passengers.
Furthermore, the modifications that have been made to convert the station wagon to a dual cab utility have significantly changed both the appearance of the vehicle and its characteristics to that of a goods carrying vehicle used for business or trade.
Accordingly, the dual cab utility vehicle is a commercial vehicle for the purpose of the LCT Act, and is not subject to luxury car tax because it is not a luxury car.