Contents
- What is luxury car tax?
- Luxury car tax threshold
- Who is liable to pay LCT?
- Scenarios where LCT is applicable
- When is luxury car tax not applicable?
- How to calculate LCT
- Luxury car tax on an import
- LCT on resale of previously taxed cars
- Reporting and managing LCT records
- Luxury car tax adjustments, credits, and refunds
What is luxury car tax?
Luxury car tax (LCT) is a tax on purchasing or importing luxury vehicles that exceed a particular threshold value.
The car’s total value, which is used to assess the applicability of the tax, comprises several components. These include:
- the purchase price of the vehicle
- the goods and services tax (GST) added to the purchase
- any customs duty incurred during importation
- the value of additional items such as accessories or attachments, and even the cost of delivery by the dealer
If the cumulative value of these factors exceeds the LCT threshold, which is subject to annual review and adjustment, the luxury car becomes liable for the tax. It’s important to note that:
- the LCT is not applied to the entire value of the car but only to the portion that exceeds the threshold
- the current tax rate for luxury cars falling within this category is 33%
- the tax applies to the sale of vehicles that are two years old or less, indicating that they were either imported into Australia within the last two years or manufactured within the country during that time period
- the LCT calculation varies depending on whether the vehicle is classified as fuel-efficient or falls under the category of other vehicles
Fuel Efficient Car
A fuel-efficient car is defined as a vehicle with a fuel consumption rate of no more than seven liters per 100 kilometers, as per the combined rating established under the vehicle standards outlined in section 7 of the Motor Vehicle Standards Act 1989.
From 1 July 2025, the maximum fuel consumption for a fuel efficient car will reduce from 7 litres to 3.5 litres per 100km.
This fuel efficient criterion serves as a benchmark to identify vehicles that exhibit exceptional fuel efficiency, ensuring that they are distinguished and treated differently in terms of luxury car tax calculations.
Luxury car tax threshold
The luxury car tax (LCT) is determined as 33% of the vehicle’s GST-inclusive value that exceeds the luxury car threshold.
The thresholds for the Luxury Car Tax (LCT) in the fiscal year 2023/24 are defined as follows:
Vehicles that are fuel-efficient must have a value exceeding $79,659 in order to be subject to the tax, while all other types of vehicles need to have a value higher than $69,152 to be eligible for the tax.
The table below presents the luxury car tax (LCT) thresholds for the financial year you import, acquire, or sell a car. Keep in mind that the LCT thresholds are subject to change each financial year. Therefore, it is vital for you to carefully consider these thresholds when dealing with the importation, acquisition, or sale of a car in Australia.
| Financial Year | Fuel-Efficient Vehicles | Other Vehicles |
| 2023/24 | $89,332 | $76,950 |
| 2022/23 | $84,916 | $71,849 |
Who is liable to pay LCT?
Registered Businesses
If you are registered or required to be registered for Goods and Services Tax (GST), and you sell or import a luxury car, you are generally obligated to pay Luxury Car Tax (LCT). This includes retailers, wholesalers, manufacturers, and other businesses involved in the sale of luxury cars.
Private Buyers
As an individual (private buyer), if you import a luxury car, you must also pay LCT.
In terms of the LCT, a car is defined as a motor vehicle (excluding motorcycles) that is specifically designed to transport a load of less than two tonnes and accommodate fewer than nine passengers.
Additionally, it is worth mentioning that a limousine is classified as a car for LCT purposes, irrespective of the number of passengers it is designed to accommodate. Therefore, limousines are included in the category of vehicles subject to LCT.
Scenarios where LCT is applicable
Cars purchased by individuals with disabilities
LCT applies to a car purchased by a person with a disability, even if the car is GST free. However, LCT is not applicable for modifications made to a car that solely serves the purpose of adapting it for driving by a disabled person or for transporting a disabled person, such as wheelchair modifications.
Purchases by endorsed public institutions
If you are an endorsed public institution, such as a registered museum, gallery, or library, and purchase a luxury car locally, you must pay Luxury Car Tax (LCT). This requirement applies to institutions registered for GST and endorsed as deductible gift recipients.
However, obtaining an LCT refund is possible under specific circumstances. If the luxury car is considered a work of art or a collector’s piece intended solely for public display, the institution is eligible for a refund of the LCT amount paid.
Luxury car sales
Selling a luxury car in Australia involves considerations related to LCT, especially if the sale occurs within the scope of a business and the seller is registered or required to be registered for GST. LCT applies in various scenarios such as:
- Dealer Sales: When a dealer sells a car to an individual or business, the car passes through multiple stages. The first stage is the car passing from the manufacturer or importer to a finance company, then to the dealership, and finally to the end customer. Each stage is treated as a separate sale subject to LCT.
- Sales within GST Group or Joint Venture: If a dealer, wholesaler, manufacturer, or importer provides a luxury car to an employee, associate, or member within the same GST group or GST joint venture, LCT applies.
- Sales to Government Departments or Agencies: LCT is applicable when a car is sold to a Commonwealth, state, or territory department, agency, or statutory authority, excluding cases where the car is used as an emergency vehicle.
- Sale of Business Capital Asset: If a luxury car, which is considered a capital asset of a business, is sold or traded in, LCT is applicable on the transaction.
- Sale by Endorsed Public Institution: In instances where an endorsed public institution sells a car that is classified as a work of art or a collector’s piece, and the buyer is not an endorsed public institution, LCT is applicable.
Providing a car to an employee or other related party
When you provide a luxury car to an employee or associate, either as a bonus or as part of a salary package, you must pay LCT.
Employee or Associate Provision: If you sell a luxury car to an employee, associate, or an employee of your associate at a price below its market value, or if you gift the car to them, the LCT value of the car is determined based on its market value including GST, excluding any LCT payable. Associates refers to individuals and entities closely connected to you, such as relatives, closely connected companies, or trusts. In the case of a partnership, a partner is considered an associate of the partnership.
GST Group Provision: If you are a member of a GST group and provide a luxury car to another member within the group, the responsibility for LCT liability lies with the GST representative member.
GST Joint Venture Provision: If you participate in a GST joint venture and provide a luxury car to another participant within the joint venture, the LCT liability is borne by the joint venture operator.
When is luxury car tax not applicable?
ABN Quoting
You are exempt from LCT when you quote an Australian Business Number (ABN) in the approved format. This exemption is applicable in specific circumstances and requires proper documentation.
Car Age and Importation
LCT does not apply to cars that weren’t imported and manufactured more than two years before the supply. Similarly, you are not liable for LCT if a car has been imported more than two years before the supply.
GST free Exports and Emergency Vehicles
LCT is not applicable if you export a car as a GST free export. Additionally, vehicles intended or registered for use as emergency vehicles, such as firefighting vehicles, ambulances, police cars, or search and rescue vehicles, are exempt from LCT.
Motor Homes, Campervans, and Commercial Vehicles
The Luxury Car Tax does not impose any obligations on campervans, motor homes and commercial vehicles that primarily aim for transporting goods rather than passengers. Regardless of their value, these vehicles are not subject to LCT.
Modifications for People with Disabilities
As mentioned earlier, you are not required to pay LCT for car modifications to accommodate people with disabilities. These modifications aim to enhance accessibility and mobility for individuals with specific needs.
Previously Paid LCT and Endorsed Public Institutions
You are not liable for additional LCT if you have already paid LCT on a car. Moreover, when you, as an endorsed public institution, import a car as a work of art or collectors’ piece solely for public display or sell such a car to another endorsed public institution for public display purposes, LCT is not applicable.
Unaltered Reimportation
If a car is reimported in an unaltered condition and the importer was either the manufacturer, owner, importer, or acquirer of the car before it was exported from Australia, LCT is not applicable.
Reimportation After Servicing, Repair, or Refurbishment
Cars serviced, repaired, or refurbished overseas and reimported into Australia without any change in ownership, may be exempt from LCT.
How to calculate LCT
The main equation to work out the LCT amount on a car is:
(Purchase Price inc. GST – LCT Threshold) * (10÷11) * (33÷100)
The LCT threshold for the year 2023-24 is $76,950. The calculation is performed using the basic equation, resulting in an applicable LCT value of $6,915 for a car with a purchase price of $100,000 (including GST).
Example:
| Equation | Calculation | Value |
| Basic Equation | (Purchase Price inc. GST – LCT Threshold) * (10÷11) * (33÷100) | |
| Purchase Price inc. GST | $100,000 | |
| LCT Threshold (2023-24) | $76,950 | |
| Over Threshold Amount | $23,050 | |
| GST | 10/11 | |
| LCT | 33/100 | |
| (Price – Threshold) x GST x LCT | ($100,000 – $76,950) x (10/11) x (33/100) | $6,915 |
Hence, when considering the luxury car tax, an individual purchasing a luxury car priced at $100,000 would incur a total cost of $106,915 ($100,000 + $6,915). This amount reflects the inclusion of the luxury car tax in the overall expense. And the LCT is passed onto the purchaser in the sale.
What Costs Are Excluded in Calculating LCT?
The LCT value of a car does not take into account the following:
- The luxury car tax that is already included in the sale price
- Other taxes, fees, or charges imposed in Australia, such as stamp duty, transfer fees, and registration fees
- Compulsory third-party insurance (CTPI)
- Extended warranties
- Costs associated with financing the purchase of car
- Service plans
Luxury car tax on an import
When importing a car into Australia, it is crucial to understand how to calculate the LCT amount that needs to be paid.
By following a specific formula, you can determine the LCT based on the car’s value and other relevant factors. The steps involved are:
Start by determining the LCT value of the imported car. This includes the following components:
- The customs value of the car and any related parts, accessories, or attachments imported concurrently
- Additional amounts not included in the customs value for international transport and insurance of the car and related items.
- Customs duty and GST payable on the importation
- For GST free imports, an amount equivalent to the GST that would have been payable
Once you have the LCT value, you can use the following formula to calculate the LCT amount:
(LCT value – LCT threshold) × 10 ÷ 11 × 33%.
Example Calculation:
A company imports a car in the 2023-24 income year. The customs value of the car is $90,000 before GST, and he incurs additional import costs of $2,500 (inclusive of GST).
Step 1: Calculate the LCT value:
Customs value of the car: $100,000
GST applied at import (10% of $100,000): $10,000
Import costs (GST inclusive): $2,500
LCT value = $100,000 + $10,000 + $2,500 = $112,500
Step 2: Apply the LCT formula:
(LCT value – LCT threshold) × 10 ÷ 11 × 33%
($112,500 – $76,950) × 10 ÷ 11 × 33%
$24,550 × 10 ÷ 11 × 33% = $10,665 (LCT amount payable)
Thus, calculating the LCT on imported cars involves determining the LCT value and applying the appropriate formula.
LCT on resale of previously taxed cars
When selling a car that is two years old or less and has already been subject to LCT, certain factors must be considered.
LCT Payment on the Latest Sale
If a car that is two years old or less has previously been subject to LCT, you may still be liable to pay LCT on the latest sale if the car’s value has increased.
However, the LCT payable for the latest sale is reduced by the total amount of LCT paid or due to be paid on any previous sale or importation. When calculating the LCT payable, it is important to consider any previous LCT adjustments, excluding bad debts.
No LCT Decreasing Adjustment
If a car two years old or less has decreased in value, there is no entitlement to an LCT decreasing adjustment or credit when reselling the car. This means that no adjustment is made to reduce the LCT amount based on the depreciation of the car’s value.
Documentation Requirement
Proper evidence must be provided to establish that LCT was previously paid or due to be paid on the car. This can include:
- Documents indicating that your supplier conducted a taxable luxury car sale due to your failure to quote your Australian Business Number (ABN).
- Invoices or documents associated with a prior taxable sale or importation.
- A written statement from a previous owner or supplier, specifying the amount of LCT that has been previously paid or is due to be paid.
LCT Records
Reporting LCT
Ensure timely reporting and payment of LCT by including it on your activity statement and other business taxes. Align the tax period for LCT with your GST reporting period. Depending on your situation, make LCT payments monthly, quarterly, or annually.
Maintaining accurate LCT records
To accurately report LCT liabilities and support any adjustments, credits, or refunds, maintain detailed records for a period of five years. The following record-keeping requirements are essential:
Documentation of Your Business Activities (Trading in Luxury Cards)
- Maintain and provide records of your motor dealer’s license and other legal documents necessary for selling cars.
- Keep evidence demonstrating that you possess appropriate premises for storing and displaying the cars involved in your business.
- Retain records of approvals allowing you to conduct a motor trading business at your specific location.
- Maintain transaction records in accordance with the requirements specified by your motor dealer’s license.
- Preserve records such as business plans or relevant documentation outlining your operational strategies and intentions.
Records of Car Acquisition, Importation, and Purchase:
- Keep comprehensive records of orders, consignment agreements, and contracts associated with car purchases.
- Retain bailment agreements, along with assigned values, indicating when cars were placed into or removed from bailment.
- Document importation details, including the date of import.
- Maintain bank or financial records substantiating payments made to suppliers.
- Preserve finance contracts and applications that demonstrate the availability of cars for resale or trade.
- Retain purchase records, tax invoices, and quotes issued, including LCT amounts payable on supplies.
- Document fuel efficiency ratings when determining LCT amounts based on the fuel-efficient threshold.
- Keep registration details of the cars involved in your trading activities.
- Preserve invoices and contracts related to additional supplies or modifications made to the cars.
- Retain invoices for consumables and services directly associated with the cars, such as fuel, repairs, servicing, transportation, and modifications.
Records of Car Usage
- Maintain records of odometer readings at the time of car acquisition, sale, or other forms of resupply.
- Keep a logbook containing dates, times, distances, and reasons for car usage.
- Retain verifiable details of all individuals who drove the cars, including the purpose of their usage.
- Preserve insurance details and comprehensive policy documents indicating that the cars are eligible for motor trading purposes.
- Maintain records of advertising and marketing activities, including sales leads and follow-up details.
Records of Car Sales, Export, or Resupply
- Retain tax invoices and sales contracts for all car sales, exports, or other forms of resupply.
- Preserve quotes received for the supply of cars.
- Document export records as applicable.
- Maintain records of any motor vehicle incentive payments received for the cars.
- Keep accurate records of how you calculated the LCT payable, including any previously payable amounts.
- Retain records demonstrating how you determined the GST-inclusive market value of cars, particularly when supplied to an associate or through hire or lease.
Quoting ABN for LCT Deferral
If a purchaser has quoted their ABN to defer LCT, ensure you have the following documents:
- Retain a copy of the ABN quotation provided by the recipient at or before the time of supply.
- Keep a copy of the purchaser’s motor dealer’s license or any other evidence confirming their entitlement to trade in cars.
- Verify the quoted ABN’s validity and GST registration status using the ABN Lookup tool.
Adhering to proper reporting procedures and maintaining comprehensive records is crucial for complying with LCT requirements. By actively reporting LCT on your activity statement and maintaining accurate records, you can ensure compliance with regulations and facilitate any necessary reviews or audits.
Quoting ABN for deferring LCT payments
If your business is registered for GST, you can defer paying LCT by quoting your ABN. You can use this option if you intend to use the luxury car solely for one of the following purposes:
- Holding it as trading stock (excluding hire or lease).
- Conducting research and development on behalf of the car’s manufacturer.
- Exporting the car GST free.
However, it’s important to note that there are restrictions on quoting your ABN for certain uses of luxury cars. You cannot quote your ABN if the luxury car will be used for:
- Personal purposes
- Rally or race driving
- Staff salary packaging
- Promotion or sponsorship activities
- Executive transportation
- Treating it as a capital asset
These restrictions apply even if you plan to sell the car at a later stage. If you have quoted your ABN but subsequently use the luxury car for any restricted purposes, you will be required to pay the applicable LCT.
There are also specific considerations for retail car dealers and businesses involved in importing luxury cars. Retail car dealers can quote their ABN when purchasing a car as trading stock, specifically if it will be used as a demonstrator vehicle for potential customers.
Importing businesses can quote their ABN when importing a luxury car for restoration and subsequent sale, provided the car is solely held as trading stock without any other intended use.
When it comes to quoting your ABN, it must be done at or before the time of purchasing or importing the luxury car. Quoting your ABN after the purchase is prohibited, except in certain circumstances where adjustments may be allowed.
Luxury car tax adjustments, credits, and refunds
In certain situations, adjustments, credits, and refunds may apply to the Luxury Car Tax for businesses. This section provides an overview of the options available for making adjustments, claiming credits, and seeking refunds for LCT payments.
Adjustments on BAS
If you are registered for GST and LCT, you can adjust overpaid or underpaid LCT on your BAS.
LCT Credits
If you are not registered for GST, you cannot make LCT adjustments on your BAS.
However, you may be eligible for an LCT credit if:
- You have overpaid LCT on a sale where the supplier paid an amount of LCT that was not legally payable, and you have paid the excess amount.
- You have paid LCT on a sale or importation but could not quote your ABN because you were unregistered at the time.
- You have exported a luxury car (on which LCT has been paid) as a GST free export.
Credit can only be claimed if no other valid claims for credit have been made.
To claim a credit for overpaid LCT on a sale, you must lodge the claim within four years of becoming entitled to the credit. However, make a claim to the Australian supplier for a GST free export.
Refunds
Primary producers and tourism operators who have acquired or leased eligible vehicles during a specific financial year are eligible to receive a refund on the Luxury Car Tax (LCT) they have paid.
In this context, an eligible vehicle refers to a passenger car that possesses either four-wheel drive or all-wheel drive capability and meets the minimum ground clearance requirement of 175mm. Additionally, off-road passenger vehicles are also considered eligible for a refund.
It is important to emphasize that primary producers and tourism operators must be registered for GST to qualify for an LCT refund. The refund claim must be submitted within four years from the date of entitlement.
Moreover, primary producers and tourism operators can claim a maximum refund of $3,000 for their Luxury Car Tax (LCT) payments. Primary producers can claim the LCT refund for one eligible vehicle per financial year, while tourism operators can claim the refund for each eligible vehicle acquired or leased within the same financial year.
This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.