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Luxury car tax explained – December 2012

You can judge whether a car is luxury or not, according to the government, if it costs more than $59,133. It’s not an over-the-top outrageous price tag if you’re considering true luxury, but it’s enough to cop an extra tax.

A “luxury car” is a motor vehicle designed to carry a load of less than two tonnes and fewer than nine passengers, with a GST-inclusive price that exceeds the luxury car tax threshold. So a “luxury” car could be a:

  • four wheel drive
  • sedan
  • passenger car
  • light truck
  • station wagon
  • hearse, or
  • limousine (regardless of the number of passengers).

It does not include:

  • prescribed emergency vehicles
  • a commercial vehicle that is not designed for the principal purpose of carrying passengers
  • approved vehicles used to transport disabled people seated in wheelchairs (unless the sale of the vehicle was GST-free)
  • cars that are more than two years old at the time of supply
  • trucks or vans that carry more than two tonnes
  • fuel-efficient cars (that is, those that burn less than seven litres of fuel per 100 kilometres, as long as the fuel-efficient vehicle costs less than $75,375)
  • campervans, or
  • mobile homes.

The tax kicks in after the threshold is reached, and has been set at 33% since July 1, 2008. The tax applies to the amount that exceeds the threshold and is in addition to GST. The threshold of $59,133 includes GST but excludes charges such as stamp duty or compulsory insurance. And the amount of tax is calculated only on the vehicle’s value over the threshold, not the GST portion of it (that is, there’s no tax on tax).

From a typical car buyer’s point of view, where the tax is payable it will already be factored into the price quoted by a dealership or car yard.

As the luxury car tax only applies to those registered for GST, private sales are generally not covered (although it can still apply if you import a luxury car). Businesses acquiring a luxury car will be restricted in their claim for GST credits to the luxury car threshold, so if the car costs more than $59,133, GST credits are not available in respect of the excess. In other words, the maximum credit you could claim will be $5,224.

Primary producers and tourism operators may also get a break, in that those that collect GST can claim a refund of 8% of the tax, up to $3,000 per car. To be eligible for the concession, a primary producer or a tourism operator must have an ABN and be registered for GST. The proviso here however is that such refunds are limited to four-wheel drives or all-wheel drives and are either a “passenger car” with a ground clearance of at least 175mm or an “off-road passenger” car. Further, primary producers can only claim for one vehicle a year.

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