Shopping for a “luxury car”? Beware of the luxury car tax
You can judge whether a car is luxury or not, according to the government, if it costs more than $64,132 for 2016-17.
It's not an over-the-top s price tag if you're considering true luxury, but it's enough to cop an extra tax.
So what do I need to know about the luxury car tax?
The luxury car tax (LCT) kicks in after that threshold is reached, and has been set at 33%, and applies to the amount that exceeds the threshold (ie. $64,132).
From a typical car buyer's point of view, where the tax is payable it will already be factored into the price quoted by a dealership or car yard.
Before the goods and services tax era (July 1, 2000) luxury cars were slugged with a 45% wholesale sales tax. The luxury car tax that replaced it was set at 25%, but has been 33% since July 1, 2008.
The tax is in addition to GST, and that price threshold includes GST but not charges such as stamp duty or compulsory insurance. And the amount of tax is calculated only on the vehicle's value over the threshold, not the GST portion of it (that is, there's no tax on top of a tax).
It also applies only to those registered for GST, so private sales are generally not covered (although it can still apply if you import a luxury car). Businesses acquiring a luxury car will be restricted in their claim for GST credits to the luxury car threshold, so if the car costs more than $57,581 (which is the figure used for luxury car depreciation purposes), GST credits are not available in respect of the excess. In other words, the maximum credit you could claim will be $5,235.
Yes there are. Generally speaking, vehicles not included are emergency vehicles, trucks or vans that carry more than two tonnes, and passenger carrying vehicles such as buses. Cars specially fitted out to transport disabled people are generally excluded, if the vehicle is supplied inclusive of GST.
Cars that are more than two years old escape the tax, so in general the LCT applies to mostly new vehicles – a second hand luxury car which has had some depreciation therefore may be a good buy.
Fuel-efficient cars (that is, those that burn less than seven litres of fuel per 100 kilometres) are given a break. As long as the fuel-efficient vehicle costs less than $75,526 (for 2016-17), there's no LCT to pay.
Keep this tax in the back of your mind when you shop for your next set of wheels.
Harper Group Pty Ltd Chartered Accountants Frankston ph 03 9770 1547
Disclaimer: All information provided in this article is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.