Luxury Car Tax – a luxury for who?

Tax Insights

Luxury Car Tax was introduced in 2001 by the Howard Government as a measure to protect the local car manufacturing industry from foreign imports after the introduction of tLuxury Car Tax was introduced in 2001 by the Howard Government as a measure to protect the local car manufacturing industry from foreign imports after the introduction of the GST. he GST. 

Luxury vehicles were previously taxed at higher rates under the Wholesale Sales Tax, but after the introduction of GST, the Wholesale Sale Tax was removed and a new taxation method was introduced.

The basic premise of the Luxury Car Tax is to apply an additional tax of 33% on the value of the vehicle above the Luxury Car Tax Limit (LCTL). Any amount above that limit is subject to further tax.

The current Luxury Car Tax limit thresholds for 2021/22 for fuel-efficient vehicles is $79,659, and $69,162 for other vehicles.

The threshold value of a vehicle includes items such as GST on purchase and customs duty but does not include costs such as stamp duty, registration, extended warranties, or finance costs. 

Luxury Car Tax is paid by the dealership that sells or imports luxury cars, and also by individuals who import luxury cars. Ultimately, however, Luxury Car Tax is paid by the end-user - either individual taxpayers or businesses who purchase these vehicles for private or business use.

For some businesses, there is the ability to claim a refund of Luxury Car Tax. This refund is available to primary production and tourism operators.

Primary Production businesses can claim a refund of up to $10,000 per year, and tourism operations can claim one refund of up to $3,000 per year.

It’s beneficial for these businesses to be able to access the refund of Luxury Car Tax, however considering the introduction of Luxury Car Tax was to support the Australian car manufacturing industry, which no longer exists, is it time for the application of purpose of this tax to be reconsidered?

For more information 

To discover if you are eligible for Luxury Car Tax, please contact your local RSM office and speak to one of our advisers today.

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