What is luxury car tax?

What is Luxury Car Tax?

Luxury Car Tax (LCT) is a tax collected by the Australian Taxation Office on luxury cars. The tax is typically payable by businesses that purchase or import luxury cars, as well as non-business entities which import luxury cars.

LCT is a tax of 33% applied on the value of a car above the LCT threshold. However, this threshold is reviewed every year and there are other conditions that will determine whether or not a car qualifies for LCT.

How does luxury car tax work?

LCT is charged in addition to the GST on a vehicle, though you do not have to pay LCT on the full price of a vehicle. Instead, it's only payable at a 33% rate on the value of the vehicle which exceeds the LCT threshold. For the 2013-14 financial year, this threshold stands at $60, 316, while fuel-efficient cars have a higher threshold of $75, 375.

When calculating the value of a car for LCT purposes, the value of parts, accessories or attachments supplied with the car will be taken into account. Though the cost of LCT is typically borne by businesses, in some cases they can pass this cost on to the final consumer.

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How to register for LCT

If you run a business that sells cars to consumers, you will need to have an Australian Business Number (ABN) and be registered for GST. You will need to satisfy both these requirements before registering for LCT.

You can apply for an LCT business account in the following ways:

• Online at the Australian Business Register when you apply for an ABN
• By completing and submitting a hard-copy form
• Over the phone
• Through your registered tax agent or BAS agent

Applying for this type of account will mean that the 1E and 1F labels appear on your activity statement.

When should luxury car tax be charged?