Luxury car tax: determining a vehicle’s principal purpose

The ATO recently explained how to determine the principal purpose of a car for ‘luxury car tax’ (‘LCT’) purposes (since LCT is not payable on the supply or importation of cars whose principal purpose is the carriage of goods rather than passengers).

Broadly, a luxury car (i.e., a car subject to LCT) is a car whose LCT value exceeds the LCT threshold. However, a commercial vehicle that is not designed for the principal purpose of carrying passengers is specifically excluded as a luxury car.

The ATO’s new determination sets out various factors to be considered in determining the principal purpose of a car, as well as factors to consider when assessing a car’s modifications.

The determination states that commercial vehicles are unlikely to have the body types of station wagons, off-road passenger wagons, passenger sedans, people movers or sports utility vehicles, and the supply of these vehicles for an amount above the LCT threshold without LCT being paid may well attract the ATO’s scrutiny.

—

If you have any questions or would like to speak to one of our professional business and tax advisors, please contact our office on (08) 9392 7600 to make a booking or click here.

With three offices across Western Australia and over 20 years of experience, Muntz Partners is a dynamic team of highly trained and skilled individuals committed to providing innovative and effective advice, excellent service and maintaining only the highest standards in ethical professional practice.