Edited version of private advice

Authorisation Number: 1052241153753

Date of advice: 12 April 2024

Ruling

Subject: Luxury car tax

The ruling requires the Commissioner to determine whether certain modified vehicles are commercial vehicles designed for the principal purpose of carrying goods for the purposes of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act).

Generally, luxury car tax (LCT) is payable when there is a taxable supply or taxable importation of a luxury car (Division 5 of the 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:

...

c) a commercial vehicle that is not designed for the principal purpose of carrying passengers; or

...

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

•         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).

In the Luxury Car Tax Determination 2023/1 Luxury car tax: how to determine the principal purpose of a vehicle (LCTD 2023/1), the Commissioner outlines the factors that need to be considered when assessing the principal purpose of a vehicle, as well as providing some examples of vehicles that are commercial vehicles not designed for the principal purpose of carrying passengers.

Factors to be considered in determining the principal purpose of all vehicles include but are not limited to:

•         the appearance and presentation of the vehicle

•         any relevant promotional literature

•         the emphasis evident in marketing

•         the vehicle's specifications

•         the Australian Design Rules (ADRs) applicable to the vehicle, according to Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005 (ADR) vehicle category classification

•         the load carrying capacity

•         the passenger carrying capacity.

Furthermore, when assessing a vehicle's principal purpose, consideration is given to the principal purpose of the vehicle as originally designed and any modifications that are incapable of being readily reversed. It is important to note that it is not relevant whether modifications are actually reversed or whether anyone intends for those modifications to be reversed. The relevant question is whether the modification is capable of being readily reversed.

The vehicles in question are not dual cab utility vehicles. As such, we apply each of the factors in LCTD 2023/1 and taking into account the permanency and extent of the modifications, we consider some of the vehicles to be commercial with a principal purpose of carrying goods, while other variants still maintain their original design purpose as passenger carrying vehicle.

This ruling applies for the following periods:

1 April 2024 to 30 June 2027

The scheme commenced on:

1 April 2024

Relevant legislative provisions

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

A New Tax System (Luxury Car Tax) Act 1999 Section 27-1