New legislation introduced on the 1st of May 2014 will now see some customers pay even more for new vehicles for the Luxury Car Tax (LCT) with incentives and discounts also now being taxed. The new announcement means that special deals or factory-backed incentives will also attract Luxury Car Tax, which was not previously the case.
The Luxury Car Tax is a tax of 33% on luxury cars sold or imported where the value of a car exceeds the luxury car threshold. Luxury Car Tax only applies to the amount above the luxury car threshold. For the 2013-14 financial year, the LCT thresholds are:
Fuel efficient vehicles (a fuel-efficient car has a fuel consumption that does not exceed seven litres per 100 kilometres as a combined rating): $75,375
Other vehicles: $60,316
Essentially, the LCT adds a 33% tax to any new cars costing more than $60,316, except those that are deemed fuel efficient. You will be taxed 33% for the value that you go over the threshold.
Prior to this change, the LCT was only calculated on the price paid by the customer, for example, excluding the special dollar value from a discount campaign. However, now the LCT also applies to the discount incentive you receive. Say if you received $3,000 off your car you will now also have to pay tax on this amount too which will amount to around $1,000. This means that if there is a cash-back offer on the purchase of a luxury car, you will see a smaller discount off the price of the car due to the additional tax.
When does the LCT typically apply?
- The vehicle is purchased from a dealership
- The vehicle is less than two years old
- The vehicle’s price (including GST, excluding government charges such as stamp duty, registration & CTP) exceeds the LCT threshold.
According to Government figures, only 1 in 10 new cars sold in Australia attracts the LCT. This amounts to almost $500 million in tax revenue per annum.
Car manufacturers such as Toyota who are already dissatisfied with the LCT are set to be hit even harder with this new change.
For more information on the changes to the Luxury Car Tax from a buyer or sellers point of view, please feel free to get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
