RSM Australia

Indirect Taxes

How will the federal Budget impact SMEs

Bright sunshine for tourism operators, welcome rain for farmers.

The Government has announced no changes to Goods and Services Tax (GST) and limited change to Luxury Car Tax (LCT).

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Goods and Services Tax (GST)

There have been no changes affecting GST in this year’s budget, indicating clear skies for the foreseeable future.

Limited change to Luxury Car Tax (LCT)

LCT is a tax imposed on businesses for the purchase or importation of luxury cars.  Based on the current definitions, a luxury car is a vehicle with a GST-inclusive price over $66,331 (or $75,000 for fuel-efficient vehicles).

Currently, primary producers and tourism operators may be eligible for partial refunds of LCT paid on certain four-wheel and all-wheel drive vehicles (8/33rds of the luxury car tax up to a maximum of $3,000). In what is bright sunshine for tourism operators and welcome rain for farmers, this Budget measure removes the partial refund and extends the maximum to $10,000. This will apply to vehicles acquired on or after 1 July 2019.  There will be no changes to the eligibility criteria or vehicle types.

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  • No changes to Goods and Services Tax (GST)
  • Limited change to Luxury Car Tax (LCT)

 

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  • Primary producers
  • Tourism operators

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  • Other business purchasers of luxury motor vehicles – there was some speculation this budget would eliminate LCT, however, this has not happened.

 

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CASE A

ABC Tourism Pty Ltd acquires a four-wheel-drive for $120,000 (including GST). It currently pays LCT of $16,101. Under the existing legislation, ABC Tourism Pty Ltd would be entitled to a refund of $3,000, being the lower of the $3,000 and 8/33rds of the LCT paid. Under the proposed budget measures, ABC Tourism Pty Ltd will receive an LCT refund of $10,000.

CASE B

Farmer Unit Trust acquires an all-wheel-drive for $90,000 (including GST). LCT paid on this vehicle is $7,101. Under the current rules, Farmer Unit Trust is entitled to a refund of the LCT paid of $1,721, being the lower of the $3,000 threshold and 8/33rds of the LCT paid. Under the proposed budget measures, the Trust would receive a full LCT refund of $7,101.

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AUTHORS

Michael Watkins

Michael Watkins
Senior Manager, Tax Services