Edited version of private advice

Authorisation Number: 1052000869949

Date of advice: 30 June 2022

Ruling

Subject: Luxury car tax

The ruling requires the Commissioner to determine whether 2 variants of the newly designed and built vehicles are commercial vehicles not designed for the principal purpose of carrying passengers for the purposes of A New Tax System (Luxury Car Tax) Act 1999 (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.

For LCT purposes, the Commissioner considers a commercial vehicle is designed for the principal purpose of carrying goods used for business or trade.

Commercial vehicles not designed for the principal purpose of carrying passengers typically include:

•         trucks

•         hearses

•         some vans, for example, cargo or delivery vans.

Vehicles designed principally 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).

The Commissioner's current view, as provided in Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: Dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel (MT 2024) is that the test in clause 4.5.2 of the Australian Design Rules is the appropriate test for determining the principal purpose of single cab or dual cab utility vehicles which have a load capacity of less than one tonne. This test provides that the principal purpose of the vehicle may be determined by reference to how the majority of the vehicle's load capacity is utilised, where each passenger seat is allocated 68kg of the available load capacity.

The method outlined in MT 2024 only applies to dual cab or crew cab vehicles.

For all other cars (including utility vehicles with a load capacity greater than one tonne), the Commissioner considers that the appropriate test is to consider the factors detailed in Taxation Determination TD 94/19 Fringe benefits tax: is the method outlined in Taxation Ruling MT 2024 appropriate for determining whether a vehicle, other than a dual or crew cab, is 'designed for the principal purpose of carrying passengers' and thereby ineligible for the work-related use exemption available under subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986? (TD 94/19), as well as any other relevant factors. The factors in TD 94/19 are to be considered on balance against all other relevant factors, with no single factor being determinative:

2. In determining the principal purpose for which any other vehicle was designed, regard should be had to factors including, but not limited to, the following:

•         the appearance and presentation of the vehicle

•         any relevant promotional literature

•         the emphasis evident in marketing

•         the vehicle's specifications

•         load carrying capacity

•         passenger carrying capacity.

The vehicles in question are not dual cab utility vehicles. Applying each of the factors listed in TD 94/19, we consider both variants to be commercial vehicles not designed for the principal purpose of carrying passengers.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999 Section 25-1