Edited version of private advice

Authorisation Number: 1051763065486

Date of advice: 8 October 2020

Ruling

Subject: Luxury car tax

Question

Is "the modified 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:

20XX-XX income year

20XX-XX income year

The scheme commences on:

1 September 20XX

Relevant facts and circumstances

You are registered for Goods and Services Tax (GST).

You are a car dealership.

When requested by a customer, a station wagon is sent to a third party for modifications. The modifications will be completed and returned to you prior to the sale of the modified vehicle to your customer.

The modifications require some seats to be removed from the wagon transforming it to a 5-seater (including driver seat). The wagon will be cut at the rear in order for a tray or a canopy body with full under tray toolboxes and trundle drawers to be installed, converting the wagon to a dual-cab utility vehicle ("the modified vehicle").

The vehicle's gross vehicle mass (GVM) will also be increased and the load carrying capacity will exceed person carrying capacity.

You provided photos to show the externals of the modified vehicle.

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 modified 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 modified 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 vehicle would fall under the definition of a luxury car because 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...

As the modified vehicle is considered a dual cab utility, and it has a load capacity of less than one tonne, the test in MT 2024 as detailed at paragraphs 14-16 may be relied upon to determine the principal purpose of the vehicle.

Applying the test above to the specifications of the modified vehicle, the passenger capacity did not exceed the remaining load capacity. The modified vehicle is treated as not being designed for the principal purpose of carrying passengers.

Furthermore, the modifications you have 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 modified 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.