Edited version of private advice

Authorisation Number: 1052023729219

Date of advice: 19 August 2022

Ruling

Subject: Luxury car tax

Question 1

Where you receive an invoice from a Motor Vehicle Dealer for the taxable supply of a used vehicle with an all-inclusive sales price, are you able to apply the formula at paragraph 98M of Miscellaneous Taxation Ruling MT 2010/1 Miscellaneous tax: restrictions on GST refunds under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 to work out the luxury car tax component on the supply?

Answer

No.

Question 2

You provided invoices from a Dealer for a completed transaction (supplies of used vehicles) as part of this ruling application, is there LCT payable on this invoice?

Answer

No.

Question 3

If, in addition to the invoices provided in question 2, you also obtained a written statement from the Dealer to confirm that an LCT amount had been included in the selling price, would this change the outcome of question 2?

Answer

Yes, provided that sufficient evidence is obtained to clarify the reason why the invoices stipulated an LCT amount of $0.00.

Question 4

Based on the invoices provided as part of the ruling application, do you have a decreasing luxury car tax adjustment under Division 15 of the A New Tax System (Luxury Car Tax) Act 1999?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 June 2022

Relevant facts and circumstances

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

You operate a business of purchasing vehicles in Australia for the purpose of selling to either the public in Australia or exported overseas.

The vehicles purchased and exported are generally brand-new vehicles but given the current climate with a lack of supply of vehicles, you have now begun to source used vehicles.

You have stated that some Motor Vehicle Dealers are not always forthcoming with whether the LCT component is included in the price, as such, you have received invoices with the all-inclusive sales price.

Invoices have been provided as part of the ruling application. The invoices have 'Luxury Car Tax (If Applicable)' and the amount is '0.00'. You did not quote your Australian Business Number (ABN) for these transactions.

The vehicles purchased will be exported for sales overseas.

Relevant legislative provisions

A New Tax System (Luxury Car Tax) Act 1999 Division 5

A New Tax System (Luxury Car Tax) Act 1999 Section 5-10

A New Tax System (Luxury Car Tax) Act 1999 Section 9-5

A New Tax System (Luxury Car Tax) Act 1999 Section 15-30

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

A New Tax System (Luxury Car Tax) Act 1999 Subsection 5-15(1)

A New Tax System (Luxury Car Tax) Act 1999 Subsection 5-15(2)

Reasons for decision

Generally, Luxury Car Tax (LCT) is payable when there is a taxable supply of a luxury car (see Divisions 5 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)).

Subsection 5-10(1) of the LCT Act states:

(1) You make a taxable supply of a luxury car if:

(a) you supply a *luxury car; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered.

Luxury car has the meaning given by section 25-1.

However, you do not make a taxable supply of a luxury car and not have to pay the luxury car tax where a recipient quotes their ABN for the supply of the car.

Section 9-5 of the LCT Act details the circumstances under which you are entitled to quote your ABN in relation to the supply of a luxury car.

9-5 Quoting

(1) You are entitled to *quote your *ABN in relation to a supply of a *luxury car or an *importation of a luxury car if, at the time of quoting, you have the intention of using the car for one of the following purposes, and for no other purpose:

(a) holding the car as trading stock, other than holding it for hire or lease; or

(b) *research and development for the manufacturer of the car; or

(c) exporting the car in circumstances where the export is *GST-free under Subdivision 38-E of the*GST Act.

(2) However, you are not entitled to *quote unless you are *registered.

Where you are entitled to quote your ABN, but you did not quote or your quote is not accepted, you can claim a decreasing luxury car tax adjustment for any LCT which is included in the supply of the vehicle to you provided you satisfy the conditions under section 15-30 of the LCT Act.

15-30 Changes of use-supplies of luxury cars

(1) You have a decreasing luxury car tax adjustment if:

(a) you were supplied with a *luxury car; and

(b) luxury car tax was payable on the supply because you did not *quote for the supply; and

(c) you were *registered at the time of the supply; and

(d) you intend to use the car for a *quotable purpose; and

(e) you have only used the car for a quotable purpose.

...

(2) The *decreasing luxury car tax adjustment is equal to the amount of luxury car tax that was payable on the supply.

LCT previously payable:

Subsection 5-15(1) of the LCT Act provides the formula to calculate the amount of luxury car tax payable on a taxable supply of a luxury car. Subsection 5-15(2) states:

(2) However, if luxury car tax has already become payable in respect of the car, the amount of luxury car tax payable on a *taxable supply of a luxury car is:

(a) the amount of luxury car tax on the supply (worked out in accordance with subsection (1)); minus

(b) the sum of all luxury car tax that was payable in respect of any previous *importation or supply of the car.

The amount of luxury car tax payable on a taxable supply of a luxury car is zero if the amount in paragraph (a) is less than the amount in paragraph (b).

The effect of this provision is that once luxury car tax is applied to the value of a car, it will not become payable again, unless there is a further taxable supply and the value of the car increases. The luxury car tax payable will only apply to the extent of the increase in value.

Where you purchased a used vehicle, and you did not quote your ABN, you will require evidence of the amount of LCT payable on the supply, or LCT previously paid, to claim a decreasing luxury car tax adjustment or to reduce any future LCT payable under subsection 5-15(2).

Evidence that LCT was previously paid (or due to be paid) on the vehicle can include:

•         documents showing your supplier made a taxable sale of a luxury car because you didn't quote your ABN

•         invoices or documents relating to a previous taxable sale or importation

•         a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid.

Where you receive an invoice from a Dealer for the taxable supply of a used vehicle with an all-inclusive sales price, are you able to apply the formula at paragraph 98M of MT 2010/1 to work out the LCT component on the supply?

No, because the steps in paragraph 98M of MT 2010/1 does not calculate the amount of LCT previously payable on a taxable supply.

Subsection 5-15(2) of the LCT Act looks to calculating the LCT liability, less any LCT that was payable on a previous supply. The effect of this provision is that once luxury car tax is applied to the value of a car, it will not become payable again, unless the value of the car increases and there is a further taxable supply made, then the luxury car tax will only apply to the extent of the increase.

The example at paragraphs 98L to 98O of MT 2010/1, and more specifically the formula at paragraph 98M, is intended to be used by Dealers, and is to apply only where there is a miscalculation of GST caused by when a taxpayer fails to pay LCT on a luxury car. The example is not intended for the scenario where you, as the recipient of a luxury car, are seeking to determine the amount of LCT that was previously payable by the Dealer.

As such, it is incorrect for you to use the formula to either reduce any future LCT liability, or to claim a decreasing luxury car tax adjustment.

It is not possible to reduce liability to LCT on a future transaction by applying 5-15(2), or to recoup any LCT, without confirmation of previously paid LCT.

The onus is on you to obtain evidence that LCT was previously paid (or due to be paid) on the vehicle including:

•         documents showing your supplier made a taxable sale of a luxury car because you didn't quote your ABN

•         invoices or documents relating to a previous taxable sale or importation

•         a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid.

Is there LCT payable on the invoices provided as part of this ruling application?

The invoices provided has clearly stipulated the LCT component of the supply, and the amount of LCT payable is "0.00".

Generally, even if there is no LCT component on the invoice, we cannot assume that LCT is inclusive in the price. We require evidence to confirm this. It is not possible to reduce liability to LCT on a future transaction by applying 5-15(2), or to recoup any LCT, without confirmation of previously paid LCT.

The onus is on you to obtain evidence that LCT was previously paid (or due to be paid) on the vehicle including:

•         documents showing your supplier made a taxable sale of a luxury car because you didn't quote your ABN

•         invoices or documents relating to a previous taxable sale or importation

•         a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid.

If, in addition to the invoices provided in question 2, you also obtained a written statement from the Dealer to confirm that an LCT amount had been included in the selling price, would this change the outcome of question 2?

The invoice provided has clearly stipulated the LCT component of the supply, and the amount of LCT payable is "0.00".

If you were to obtain a written statement from the Dealer to confirm that an LCT amount had been included in the selling price, there also needs to be sufficient information to explain why the invoice stipulated an LCT payable amount of $0.00.

Based on the invoices provided as part of the ruling application, are you able to use Division 15 of the LCT Act to claim a decreasing adjustment for this transaction?

An entity purchasing a luxury car, which is entitled to quote, but did not, can claim a decreasingluxury car tax adjustment only for any LCT amount included on that supply.

15-30 Changes of use-supplies of luxury cars

(1) You have a decreasing luxury car tax adjustment if:

(a) you were supplied with a *luxury car; and

(b) luxury car tax was payable on the supply because you did not *quote for the supply; and

(c) you were *registered at the time of the supply; and

(d) you intend to use the car for a *quotable purpose; and

(e) you have only used the car for a quotable purpose.

...

(2) The *decreasing luxury car tax adjustment is equal to the amount of luxury car tax that was payable on the supply.

In order for you to claim a decreasing adjustment under section 15-30, there needs to be evidence as to the amount of LCT payable on the supply.

For this particular transaction, the LCT payable is $0.00, so you do not have a decreasing luxury car tax adjustment in respect of this supply.