The Luxury Car Tax (LCT) is levied on most new cars and demonstrator vehicles which exceed the LCT threshold.
Presently this threshold stands at $57,180.00 for the financial year 2008-2009 but it is subject to changes with each financial year.
Proposed changes to LCT
It was proposed that as of October 3rd 2008, vehicles which
• surpass the figure of $57,180.00 (including GST, yet excluding stamp duty, registration & CTP)
• are acquired through a dealership
• and are less than two years old (age is calculated from the build date for locally manufactured cars and from the compliance date for import vehicles)
would see the exceeding amount taxed with 33% which reflects an 8% increase over the previously charged figure.
Exemptions to LCT
However, LCT will not apply to vehicles even when they surpass the LCT threshold if they are
• either a recreational vehicle (motor-home or campervan)
• a commercial vehicle (designed to carry loads rather than passengers)
• a fuel efficient car as measured under the fuel efficient car limit (currently at $75,000 including GST, excluding stamp duty, registration and CTP for the 2008-2009 fiscal year)
• or GST-exempt vehicles, capable of transporting less able passengers confined to wheelchairs
It is important to note that primary producers and tourism operators may be entitled to claim a refund on one eligible 4WD or AWD vehicle (primary producers) or each eligible 4WD or AWD vehicle (tourism operators) per financial year. This potential refund solely relates to the 8% increase of the LCT and furthermore only up to a maximum amount of $3000.
How LCT is calculated
Whenever the LCT is payable on a vehicle the tax will be included in the quoted price by the dealership. To calculate the exact tax however, what follows is a breakdown of how the costs come into effect:
The LCT denotes a 33% tax which is levied on the amount by which the car exceeds the current $57,180.00 threshold.
Said threshold represents the price of the car including GST but excluding government charges such as registration, CTP & stamp duty.
As an example, let the supply price (including GST, excluding government fees and charges) be set at $100,000.00.
To determine by how much the supply price exceeds the LCT threshold, deduct the $57,180.00 from the $100,000.00 supply price of the car.
→ $100,000.00 - $57,180.00 = $42,820.00
The second step is to eliminate the GST from the amount by which the supply price goes beyond the threshold and is accomplished by dividing said figure by 1.1
→ $42,820.00 / 1.1 = $38,927.27
Finally, to calculate the exact payable amount of LCT, the GST-exempt value needs to be multiplied by the LCT rate of 33%.
→ $38,927.27 x 0.33 = $12,845.99
In conclusion, the LCT which would be levied on the car in the example would be $12,845.99 and this would be reflected in the total price as quoted by the dealer. Hence in this case the price of the car (without government charges and fees) would amount to $112,845.99. ($100,000.00 supply price + $12,845.99 LCT)
As an individual looking to buy a car from a dealership it is useful to be able to break down which amount of LCT is applied to the vehicle of choice. Since the price quoted by the dealership already includes LCT, what follows is the key equation to determine the amount of LCT on a dealership quotation.
Determine by how much the quoted price (sans government fees and charges) exceeds the LCT threshold:
→ $112,845.99 - $57,180.00 = $55,665.99
The second step is then to leave out the GST and LCT from the above calculated amount. This is achieved by dividing by the value of 1.43 (reflecting 10% GST + 33% LCT)
→ $55,665.99 / 1.43 = $38,927.27
To conclude, this GST and LCT exclusive sum needs to be multiplied by the LCT rate of 33% as noted below.
→ $38,927.27 x 0.33 = $12,845.99
Consequently, the LCT contained in the sale price amounts to $12,845.99
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