Luxury Car tax in Australia: Driving a luxury car like Mercedes or BMW on the roads is one of the biggest dreams we all have dreamed of once in a lifetime, right?
But…!
Do you know how heavenly you have to pay tax for a luxury car in Australia? Owning luxury goods in Australia comes with a price.
If you are planning to buy one, you must know the tax privileges it comes with as well. Some of you might change your mind on purchasing a new luxury car once you find out the amount of tax to be paid on it.
Also Have A Look On Electric Vehicle Tax EV New Rules Australia.
Before we get straight into it, you must know the basics of car tax in Australia and how it works. The next section is specifically for those who are beginners.
Let’s have a look.
What is the car tax in Australia?
The car tax in Australia is only applied on those vehicles which are valued above the LCT (luxury car tax) threshold. The tax amount of your luxury car depends upon how much money you have spent on your luxury car.
Which means, expensive luxury cars have more tax rates than cheap ones. It doesn’t matter if your vehicle is a new one or used, if its value reaches a certain amount, tax will be applied. For better understanding, one should know what the tax threshold in Australia is.
Without any further delay, let’s get straight into it.
What is the luxury car tax threshold and how does it work in Australia?
If you are wondering what the LCT threshold is or how much it is, then here is the answer. The LCT rate for fuel efficient vehicles is $84,916 (latest and updated). Such vehicles are called hybrid ones or are electric.
The LCT threshold for all other vehicles is $71,849. If your vehicle’s value is more than the threshold (according to the vehicle type; hybrid or other), then 33% of the value is payable.
In most cases, businesses and companies who import luxury cars comply in this category but if you import a luxury car individually, you are eligible to pay tax.
IMPORTANT INFORMATION: For those who don’t know about the fuel efficient vehicles; such vehicles consume less fuel and offer high mileage. For detailed explanation, the next section is for you.
Fuel-efficient vehicles
As far as the threshold of fuel efficient vehicles is concerned, a higher threshold of about $89,332 is applied. Why?
Because they consume less fuel and offer an efficiency rating of 7.0L/100km that’s why a higher threshold applies on them. Most of the people are opting for fuel efficient vehicles as they are becoming more popular in Australia.
How does LCT work in Australia?
Now that you know what the threshold of a luxury car is, it would be easier for you to understand the working of LCT in Australia. It is the tax imposed on cars who have GST inclusive value. Basically, it is the additional tax one has to pay on the car’s sale price after the deduction of GST (only when it exceeds the threshold).
A Lot of you asked us about the previous and current thresholds. For your information, there is a 10% increase in the threshold of fuel efficient vehicles from $79,659 to $89,332.
| Year | Vehicles (fuel efficient) | Vehicles (other) |
| 2023-2024 | $89,332 | $79,650 |
| 2022-2023 | $84,916 | $71,849 |
| 2021-2022 | $79,659 | $69,152 |
| 2019-2020 | $77,565 | $68,740 |
| 2018-2019 | $75,526 | $67,525 |
| 2017-2018 | $75,526 | $66,331 |
As you can see the stats of the past decade, there is an increase in the $12,000 threshold rate for standard luxury cars and $9,541 increase for fuel efficient cars.
Additionally, Australia is now making it more feasible and cost-effective for customers to import cars.
And..!
If you are wondering about the LCT to be claimed as the deduction in the Australian Taxation office (ATO), then there is no such thing. It doesn’t matter how much you use your luxury car for only business purposes, LCT is not an allowable tax.
Does LCT apply on all cars?
Another important factor to keep in mind is whether LCT applies on all vehicles or not. If yes, then on what terms and conditions. Stay with us to find out.
The tax doesn’t apply on commercial used vehicles no matter how top-tier they are. Which means, you can add high-end accessories on your ute, you might push over the threshold rate. But there’s one more thing. Usually a ute has a capacity of 1 ton and can carry 38kg interior load, which makes it a dual-purpose for commercial use.
LCT will not be applied on dual-purpose commercial use utes so if you own one, you are free from tax.
How To Calculate LCT?
How to calculate the LCT liabilities carries utmost importance when you are making a purchase. It will help you change your decision of buying a luxury car when you calculate how much you will be going to pay tax on a specific luxury car.
The calculation formula is super easy.
LCT = Subtract LCT threshold with the value of the car and then calculate the 33% of the calculated amount. This is the simplest and easiest way to calculate the LCT. Also, there are multiple LCT calculators available online as well.
Calculation beforehand helps you to make informed decisions about the purchase.
Does Australia still charge tax on luxury cars?
We have been asked multiple times about this question so we decided to explain it briefly. One of the main reasons why Australia charges heavenly tax on luxury cars is the high revenue raising ability.
Now the question arises, where does all this tax go? Or where does Australia spend it?
This fund is further added to multiple government initiatives which improve the overall infrastructure of the country and its roads.
LCT in QLD and Victoria
This section is specifically for those who are living in Queensland or Victoria and are looking to make a luxury car purchase. There is a slight difference of tax rates in QLD and Victoria. These additional charges were added in recent years and there has been no change in that since then.
If we talk about Victoria first, if you buy vehicles around $100,000 to $150,000, then a 7% levy on vehicles is applied. Additionally, 9% is extra charged on vehicles which have value above $150,000.
On the other hand, Queensland has added additional 2% tax (stamp duty) on cars above $100,000. Always consider these considerations before opting for a luxury car in Australia.
Can you avoid paying LCT?
A lot of you might be wondering or finding loopholes to exempt LCT. Right?
The answer is YES!
There are some ways which can save you from paying tax which are as follows;
- One of the best options to prevent yourself from paying LCT is to opt for fuel efficient vehicles as they have high thresholds.
- There is no tax on used vehicles as the LCT has already been paid when the car was first sold or imported.
- If you are buying a vehicle for commercial use; non-passenger vehicle, then your vehicle would be exempt from LCT.
- An exemption on LCT is applied if a person is disabled or an eligible veteran.
- Furthermore, if a car is sale-free or goods tax-free import or if it is imported two years before the sale then the LCT may not apply.
FAQs
Conclusion
To write off, if you are planning to buy a luxury car in Australia then you must know about the terms and conditions of LCT and how it works. Knowing how to calculate LCT and threshold beforehand can help you alot in making a final decision about buying a luxury car.
Additionally, there are ways to prevent yourself from paying LCT which we have mentioned in detail above. We hope that this piece of information related to Luxury car tax in Australia has helped you in solving all your confusions and queries.
Still, if you are having any ambiguities related to car tax or luxury goods tax in Australia, feel free to ask.
Happy driving.
Read Our Previous Article On Comprehensive Guide on Tax Deductions. And Also Read Drawbacks Of Hecs Indexation Rates.
Information and statistics for This Project provided by My Tax Daily.
