Luxury Car Tax Obligation Luxury Car Tax

Guide for taxpayers with a luxury car tax obligation Luxury car tax

For more information visit www.ato.gov.au

NAT 3394-04.2012 Our commitment to you We are committed to providing you with accurate, consistent Terms we use and clear information to help you understand your rights and When we say: entitlements and meet your obligations. n sale, we mean the goods and service tax (GST) If you follow our information in this publication and it turns out term supply to be incorrect, or it is misleading and you make a mistake as n purchase, we mean the GST term acquisition a result, we must still apply the law correctly. If that means you n GST credits, we mean the GST term input tax credits owe us money, we must ask you to pay it but we will not charge n payment (made or received), we mean the GST term you a penalty. Also, if you acted reasonably and in good faith we consideration. will not charge you interest. When we say luxury car tax (LCT) paid, we mean either If you make an honest mistake in trying to follow our information LCT that: in this publication and you owe us money as a result, we will n has already been paid not charge you a penalty. However, we will ask you to pay the n is due to be paid but has not been paid yet. money, and we may also charge you interest. If correcting the mistake means we owe you money, we will pay it to you. Some terms used in this guide may be new to you. We will also pay you any interest you are entitled to. They are explained in ‘Definitions’ on page 19. If you feel that this publication does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further assistance from us. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for more recent information on our website at www.ato.gov.au or contact us. This publication was current at April 2012.

© Australian Taxation Office for the Published by Commonwealth of Australia, 2012 Australian Taxation Office You are free to copy, adapt, modify, transmit and distribute this material as Canberra you wish (but not in any way that suggests the ATO or the Commonwealth April 2012 endorses you or any of your services or products). JS 23572 Contents 01 03 Getting started 3 Importing luxury cars 10 What is LCT? 3 When are luxury car imports subject to LCT? 10 The LCT threshold 3 When are luxury car imports not subject to LCT? 10 What is a luxury car? 3 When must LCT be paid on an importation? 10 Fuel-efficient cars 3 How to work out the LCT payable on an importation 10 Working out your vehicle’s load 3 Who is liable for LCT? 3 Accounting for LCT 5 Your activity statement 5 04 Registering for LCT 5 Quoting your ABN 11 What cars are not subject to LCT? 5 Who can quote? 11 What is a commercial vehicle? 5 When to quote 11 Vehicles that carry both passengers and goods 6 How to quote 11 Quotes to cover several purchases over time (periodic quotation) 11 Non-quotable purchases and periodic quotations 12 02 Quoting on luxury cars you import 12 Who can sign a quote 12 LCT payable on supplying a luxury car 7 Supplies of luxury cars 7 When does LCT apply to a supply of a luxury car? 7 When does LCT not apply to a supply of a luxury car? 7 05 How to work out LCT 7 Cars that have already been subject to LCT 8 Adjustments to LCT 13 Other situations 9 What is an LCT adjustment? 13 An adjustment event 13 Change of use adjustments 13 Bad debt adjustments 14

Luxury car tax 1 CONTENTS

06 Credits 15 Who can claim a credit for LCT 15 How much credit can I claim? 15 How do I claim a credit? 15 Refunds for primary producers and tourism operators 15 07 Cars purchased for people with disabilities 16 LCT on cars used for transporting people with a disability 16 LCT on cars purchased by people with a disability 16 08 Emergency vehicles 18 Certification for emergency vehicles 18

Definitions 19

MORE INFORMATION inside back cover

2 Luxury car tax Getting started 01

What is LCT? The term ‘car’ does not include: LCT is a tax of 33% imposed on the GST-inclusive value of n trucks and vans designed to carry a load of more than luxury cars over the relevant LCT threshold. You must generally two tonnes pay LCT when you sell or import a luxury car. You must pay LCT n vehicles, such as buses, designed to carry nine or more as well as any GST payable. passengers n motorcycles or similar vehicles For more information, see ‘LCT payable on supplying n racing and rally cars that are not road vehicles and cannot be a luxury car’ on page 7. registered for use on public roads in any country in the world. These racing or rally cars are designed for use only on rally or racing circuits.

Special refunds may be available for some primary Fuel-efficient cars producers and tourism operators in relation to luxury cars The LCT threshold for a fuel-efficient car is known as the they buy, see ‘Who can claim a credit for LCT’ on page 15. ‘fuel-efficient car limit’. The fuel-efficient car limit is $75,375 for the 2011–12 financial year and applies to either of the following: n the year that the supply of the car occurred The LCT threshold n the date when the car was entered for home consumption. The LCT thresholds for the 2011–12 financial year are: n $57,466, which is equal to the car limit Fuel-efficient cars with a GST-inclusive value below $75,375 are not considered luxury cars. n $75,375 for fuel-efficient cars.

The car limit is: Working out your vehicle’s load n used to work out depreciation deductions under tax law To work out the load your vehicle can carry, you need to know n reviewed each financial year and may change. the tare mass and the gross vehicle mass (GVM). If you buy a car with a GST-inclusive value above these LCT The tare mass is the mass of your vehicle: thresholds, you must pay LCT. In general, the value of a car n when it is empty includes the value of any parts, accessories or attachments n with less than ten litres of fuel and other fluids in it you supplied, or imported at the same time as the car. n with all standard equipment and any options fitted. What is a luxury car? The GVM is what the manufacturer says the maximum mass A luxury car is a car with a GST-inclusive value above the of your vehicle is. LCT threshold. To work out the load your vehicle can carry, subtract the tare Under LCT law, a car is a motor powered road vehicle that is mass from the GVM. designed to carry the following: n a load of less than two tonnes For more information about vehicle loads, visit the n less than nine passengers. Department of Infrastructure and Transport website at It includes: www.infrastructure.gov.au n passenger cars n station wagons Who is liable for LCT? n four-wheel drive vehicles You must pay LCT if both of the following apply: n limousines – regardless of the number of passengers they n you are registered, or required to be registered, for GST are designed to carry. n you sell a luxury car. This includes retailers, wholesalers and manufacturers of cars and any business that sells a luxury car. If you import luxury cars, even if you are a private buyer, you may also have to pay LCT (see ‘Importing luxury cars’ on page 10).

Luxury car tax 3 01 Getting started

The rate of LCT that applies to you can vary depending on: Use this table if you are a motor vehicle dealer or importer, or n when your car was ordered are purchasing a car that is subject to LCT, and want to work n when your car was delivered out which rate applies to you. n the type of car (for example, whether it is fuel-efficient), and n whether you are a primary producer or tourism operator.

Cars delivered or Cars delivered or imported* on, Cars delivered or imported* after imported* before or after, 1 July 2008 and before 3 October 2008 1 July 2008 3 October 2008 Fuel-efficient cars 25% LCT applies 33% LCT applies, or LCT does not apply. under $75,375 25% for cars contracted before 7.30pm AEST on 13 May 2008. Cars over the LCT 25% LCT applies 33% LCT tax applies, or 33% LCT applies, or threshold (including 25% for cars contracted before 25% for cars contracted before GST), and 7.30pm AEST on 13 May 2008. 7.30pm AEST on 13 May 2008. Fuel-efficient cars $75,375 or over. Cars subject to LCT 25% LCT applies 33% LCT applies, or 33% LCT applies, or purchased by primary 25% for cars contracted before 25% for cars contracted before producers 7.30pm AEST on 13 May 2008. 7.30pm AEST on 13 May 2008. Primary producers can claim a Primary producers can claim a refund of LCT from us of up to refund of LCT from us of up to $3,000 on one eligible car per $3,000 on one eligible car per financial year. financial year.

For more information about these refunds, refer to GST and LCT on cars – for primary producers and tourism operators (NAT 72601) Application for luxury car tax refund – primary producers and tourism operators (NAT 72601).

Cars subject to LCT 25% LCT applies 33% LCT applies, or 33% LCT applies, or purchased by tourism 25% for cars contracted before 25% for cars contracted before operators 7.30pm AEST on 13 May 2008. 7.30pm AEST on 13 May 2008. Tourism operators can claim a refund Tourism operators can claim a refund of LCT from us of up to $3,000 on of LCT from us of up to $3,000 on eligible cars. eligible cars.

* ‘Imported cars’ refers to cars imported: n at the retail level for a specific customer and are not floor or trading stock, or n by car dealers where those dealers have an entitlement to quote.

4 Luxury car tax 01 Getting started

Accounting for LCT What cars are not subject to LCT? You account for the LCT when completing your activity You do not have to pay LCT on a car with a value above the statement for the tax period which applies for GST. LCT threshold if it is any of the following: n You cannot claim GST credits for LCT, regardless of whether manufactured in Australia more than two years before you use the luxury car for business or private purposes. the supply n imported and it was ‘entered for home consumption’ more than two years before the supply Your activity statement n an emergency vehicle (see ‘Emergency vehicles’ on page 18) If you are registered for GST, you must include any LCT you are n liable to pay on your activity statement. You complete the LCT not GST-free and is specifically fitted out for transporting section of your activity statement for the period in which you people with a disability who are seated in wheelchairs make a taxable supply of a luxury car or make an adjustment (see ‘Cars purchased for people with a disability’ on page 16) to LCT you were previously liable to pay. n a motor home or campervan n a commercial vehicle.

For more information, refer to Luxury car tax – how to What is a commercial vehicle? complete your activity statement (NAT 7391). These For LCT purposes, a commercial vehicle is: instructions include a section on reporting taxable supplies n of luxury cars with examples and a worksheet and also designed for the principle purpose of carrying goods used for show how to calculate adjustments. business or trade, and n not subject to LCT. These vehicles include: Registering for LCT n trucks Generally, if you operate a business that sells cars, you will n hearses, and have an Australian Business Number (ABN) and be registered n some vans. for GST. Vehicles designed mainly for carrying passengers (including To register for LCT, tick the LCT box when you apply for your paying passengers), or for sport or recreation purposes, are not ABN and GST registration. commercial vehicles and you may have to pay LCT on them.

These vehicles include: If you are already registered for GST and find that you n station wagons have to pay (or can receive a refund of) LCT, you must complete an Add a new business account (NAT 2954) form. n passenger sedans n people movers, and n sports utility vehicles (SUVs). To work out the main purpose (principal purpose) for which a vehicle has been designed, the things you need to consider include: n its appearance and presentation n relevant promotional material and how it is marketed n its specifications n the load carrying capacity, and n the number of passengers it can carry. This is known as the ‘principal purpose test’.

Luxury car tax 5 01 Getting started

Vehicles that carry both passengers and goods EXAMPLE: Working out the main purpose of your vehicle Some vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and Brooke supplies a dual cab vehicle to a buyer with seats for goods (that is a dual purpose). five people, including the driver. These vehicles include: The value of the vehicle is more than the LCT threshold and n dual cab vehicles the difference between the ‘GVM’ and the ‘unladen mass’ is 960kg. The vehicle appears to have been designed for both n crew cab vehicles, and the carriage of persons and the carriage of goods (that is a n utility vehicles. dual purpose). For LCT purposes, the designed passenger carrying capacity Brooke then looks at the passenger carrying capacity of the is worked out by multiplying the designed seating capacity vehicle, which she works out as follows: (including the driver’s) by 68kg. This figure is used when applying the Australian Design Rules. 5 passengers × 68kg = 340kg The Vehicle Standard (Australian Design Rule – Definitions She then finds out if the passenger carrying capacity and Vehicle Categories) 2005 (ADR), states that a vehicle (340kg) is less than 50% of the difference between the constructed to carry both people and goods will be considered ‘GVM’ and the ‘unladen mass’ (960kg). to be primarily for the carriage of goods if the number of seats 50% × 960kg = 480kg multiplied by 68kg is less than 50% of the difference between the ‘GVM’ and the ‘tare mass’. In this instance, because the passenger weight (340kg) is less than 50% of the remaining goods capacity (480kg), Brooke works out that the principal purpose of the vehicle For more information about Australian Design Rules is to carry goods. (ADR), visit the Department of Infrastructure and Transport website at www.infrastructure.gov.au See ‘Definitions’ for ‘GVM’ and ‘tare mass’ on page 19–20.

6 Luxury car tax LCT payable on supplying a luxury car 02

You must pay LCT at the time you supply a luxury car, unless How to work out LCT the purchaser quotes their ABN to you in an approved format You only apply LCT to the value of the vehicle above the LCT (see ‘Quoting your ABN’ on page 11). threshold, less GST. Use the following formula to work out LCT: Supplies of luxury cars 10 33 The term ‘supply’ generally means anything you provide, (LCT value – LCT threshold) × 11 × 100 including any retail and wholesale sales you make. The LCT value is the price of the car, less any: The following examples are all considered a supply under n LCT included in the supply, and LCT law: n any other Australian tax, fee or charge, other than GST and n a dealer that sells a car to an individual or business and customs duty. the car’s title passes from the manufacturer (or importer) to The price of the car should include all of the following: a finance company, then to a dealership, then to the end n GST and any customs duty customer – each stage is regarded as a separate supply. n dealer delivery charges, and n a dealer, wholesaler, manufacturer or importer that provides n a luxury car to an employee, either as a bonus or as part of standard and statutory warranties. a salary package Generally it does not include any other Australian tax, fee or n the sale of a car to a Commonwealth, state or territory charges (for example, stamp duty, transfer fees, registration, department, agency or statutory authority compulsory third-party insurance, extended warranties and n the sale or trade-in of a car that is a capital asset of costs associated with financing the purchase of the car). a business. If LCT has already been paid on the car, you can reduce the amount you must pay by the amount of LCT already paid When does LCT apply to a supply (see ‘Cars that have already been subject to LCT’ on page 8). of a luxury car? The supply of a luxury car is subject to LCT if all of the EXAMPLE: Working out the LCT you must report and pay following apply: n you make the supply in the course of your enterprise Chen sells a non fuel-efficient car worth $88,000 including n you make the supply in connection with Australia, and GST. The value of the car is more than the LCT threshold n you are registered or required to be registered for GST. ($57,466 for the 2011–12 financial year) so he must pay LCT to us on the sale of the car. When does LCT not apply to a supply To work out the amount of LCT he must pay, Chen of a luxury car? completes the following steps: The supply of a luxury car is not subject to LCT if any of the 1 He works out the total value of the luxury car that is following apply: above the LCT threshold: n the person receiving the car quotes their ABN in the Total luxury car value (including GST) – LCT threshold prescribed format (see ‘Quoting your ABN’ on page 11) $88,000 – $57,466 n the car is more than two years old – that is, it was = $30,534 manufactured in Australia more than two years before the supply, or it was imported and entered for home consumption 2 He then excludes the GST included in the amount above more than two years before the supply, or the LCT threshold: 10 n the car is exported as a GST-free export. = $30,534 × 11 If the car has been restored or converted into a limousine, = $27,758.18 the two-year period starts from when the original car was first 3 He then works out LCT (33% of the amount above the manufactured in Australia or entered for home consumption. LCT threshold less GST): If you sell the restored or converted car for an amount above 33 = $27,758.18 × 100 the LCT threshold within the two-year period, LCT will apply = $9,160` unless the buyer quotes their ABN. Chen charges $97,160 for the car (that is, $88,000 including GST + $9,160 LCT). He also reports and pays LCT of $9,160 to us on his next activity statement.

Luxury car tax 7 02 LCT payable on supplying a luxury car

EXAMPLE: Working out the LCT and GST when a luxury Example: Working out the LCT on a fuel-efficient car car has an ‘all up price’ above the threshold

Kyle’s Motors (KM) sells a luxury car (which is not a Caroline supplies an imported fuel-efficient car for $90,000 fuel-efficient car) to Bruce, for an ‘all-up price’ of $95,017, in January 2011. including GST (10%) and LCT (33%). This price does not include; stamp duty, registration or compulsory third As the price is more than the fuel-efficient car limit of party insurance. $75,375 she will need to work out the LCT she is liable to pay. She does this by completing the following steps: To work out the LCT it must pay, KM completes the following step: 1 She works out the price of the car above the fuel-efficient car threshold: 1 KM takes out the GST and LCT payable (43% in all) Total luxury car value (including GST) – fuel-efficient from the amount above the LCT threshold: car threshold: (‘all-up price’ – LCT threshold) ÷ 1.43 $90,000 – $75,375 = $14,625 ($95,017 – $57,466) ÷ 1.43 2 She then excludes the GST from this amount: = $26,259.44 10 $14,625 × 11 = $13,295.45 2 KM then multiplies this by the LCT rate of 33% to get the LCT payable: 3 She then multiplies this amount by 33% to work out the 33 LCT she must pay: $26,259.44 × 100 33 = $8,665.61 $13,295.45 × 100 = $4,387 3 KM then calculates the GST included in the ‘all-up price’. 4 She then adds this amount to the GST-inclusive price of First work out the LCT value: the car to work out the total cost: ‘all-up price’ – LCT payable on the sale = LCT value $90,000 + $4,387 = $94,387 $95,017 – $8,665.61 = $86,351.39 Cars that have already been The GST payable will be one-eleventh of this amount: 1 subject to LCT = $86,351.39 × 11 You can pay less LCT if you supply a luxury car which is less = $7,850.12 than two years old and on which an amount of LCT has already So the ‘all-up price’ of $95,017 paid by Bruce includes been paid. The LCT you must pay on this latest supply of the $8,665.61 LCT and $7,850.12 GST. car can be reduced by the sum of all the LCT that was paid (or due to be paid) on any previous supply or importation of the car.

For step-by-step instructions about calculating LCT, You must take into account any previous LCT adjustments refer to Luxury car tax – how to complete your activity when working out this reduction, except bad debts (see statement (NAT 7391). ‘Adjustments to luxury car tax’ and ‘Bad debt adjustments’ on pages 13–14). Generally, if you supply a car that is less than two years old and Example: Working out LCT on a fuel-efficient car below the car has already been subject to LCT, you will only have to the threshold pay LCT on the latest supply of the car if the car has increased in value. LCT will only apply to the amount of the increase. Sanjee supplies a fuel-efficient car for $69,000 in July 2009. If the LCT you must pay on this latest supply is less than the As the price is less than the fuel-efficient car limit of $75,375 sum of all LCT previously paid (or due to be paid), the amount LCT does not apply. of LCT on the latest supply is zero. In these situations you cannot claim a refund.

8 Luxury car tax 02 LCT payable on supplying a luxury car

You must have evidence that LCT was previously paid (or was Other situations due to be paid) on the car including: n documents showing your supplier made a taxable sale of Supply of a car to an associate a luxury car because you did not quote your ABN If you supply or give a luxury car to your employee, associate n invoices or documents relating to a previous taxable sale or an employee of your associate for less than the car’s market or importation value, the LCT value of the car will be its GST-inclusive market value excluding any LCT payable. n a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid. If the car is a fuel-efficient car under $75,375 then LCT will not apply to the supply. EXAMPLE: Working out the LCT and GST payable when If the car is a fuel-efficient car over $75,375 then the LCT value a non fuel-efficient car has been sold for an ‘all-up price’ of the car will be its GST-inclusive market value excluding any and some LCT has already been paid LCT payable.

Ben pays ABC car dealership an ‘all-up price’ of $95,017 for a second‑hand car on which LCT of $6,050.33 has Additional accessories, modifications previously been paid. The car is less than two years old and and treatments Ben does not quote his ABN. The LCT value of a car includes the price of all accessories, modifications and treatments made to the car or paid for by To work out the amount of LCT and GST payable to the the customer (or their associate), provided they are made: ATO, ABC completes the following steps: n before the car is delivered to the customer, or 1 ABC takes out the GST and LCT payable (33% in all) from n under an arrangement with the supplier of the car, or with an the amount above the LCT threshold: associate of the supplier, at or before the time of delivery. (‘all-up price’ – LCT threshold) ÷ 1.43 ($95,017 – $57,466) ÷ 1.43 = $26,259.44 Providing cars between members of GST groups 2 ABC then multiplies this by the LCT rate of 33% to get the and participants in GST joint ventures LCT payable: LCT is payable if a luxury car is provided by one GST group 33 member to another or by one GST joint venture participant $26,259.44 × = $8,665.61 100 to another unless the recipient quotes their ABN. This applies 3 ABC then excludes the LCT of $6,050.33 which was paid if the provision occurs within two years from the date of by the previous owner: manufacture in Australia or, if imported, the date of entry $8,665.61 – $6,050.33 = $2,615.28 for home consumption. 4 Then ABC works out the GST included in the ‘all-up price’. ABC first works out the LCT value: ‘all-up price’ – LCT now payable on the sale = LCT value $95,017 – $2,615.28 = $92,401.72 The GST payable will be one-eleventh of this amount: 1 = $92,401.72 × 11 = $8,400.15 So the ‘all-up price’ of $95,017 Ben paid includes $2,615.28 LCT and $8,400.15 GST.

Luxury car tax 9 03 Importing luxury cars

When are luxury car imports What is a non-taxable re-importation subject to LCT? An importation is a non-taxable re-importation if the If you import a luxury car into Australia, the car will be subject following apply: to LCT if both of the following apply: n the car was previously exported and is now being returned to n you do not quote your ABN (see ‘Quoting your ABN’ on Australia in an unaltered condition, and page 11), and n the importer either n you enter the car for home consumption (see ‘Enter for home – manufactured the vehicle, or consumption’ on page 19). – previously purchased or imported the car and LCT was paid You can make a taxable importation even if you are not at that time. registered for GST or carrying on an enterprise. When must LCT be paid on an importation? An imported car includes any car parts, accessories or If you import a luxury car, you are liable to pay the LCT to attachments you import at the same time that could reasonably Australian Customs and Border Protection Service at the same be expected to be fitted to the car. time you are liable to pay the customs duty, unless one of the If the luxury car was restored overseas using parts that were following applies: purchased and exported from Australia, you must pay LCT n you quote your ABN (see ‘Quoting your ABN’ on page 11) unless you are entitled to quote an ABN. n the car is a fuel-efficient car under $75,375. You may also be able to delay paying LCT if you give a security When are luxury car imports or undertaking to Customs, for example, if the importation is not subject to LCT? only temporary, such as when a luxury car is brought into You do not have to pay LCT on an importation of a luxury car Australia for a rally event with the intention of taking it out again. if any of the following apply: n you quote your ABN for the importation of the car How to work out the LCT payable (see ‘Quoting your ABN’ on page 11). on an importation n LCT has already been paid on the car (for example, you LCT on the importation of a luxury car is: export a luxury car from Australia, having already paid LCT on 10 33 the vehicle, it is later returned to Australia in an unaltered (LCT value – LCT threshold) × 11 × 100 condition) The LCT value of an importation includes all of the following: n the car is covered by items in Schedule 4 to the Customs Tariff n the customs value (as worked out under the Customs Act) of (see ‘What is schedule 4 to the Customs Tariff?’ below), or the car and of any parts, accessories or attachments that are n the importation of the car is a non-taxable re-importation. imported at the same time as the car and that can reasonably be expected to be fitted to the car (add-ons) What is Schedule 4 to the Customs Tariff? n amounts not already included in the customs value for the Under Schedule 4 to the Customs Tariff, a car is not subject to transport of the car and add-ons to Australia LCT at the time it is imported if it is covered by the following items. n the amount not already included in the customs value for the insurance of the car and add-ons to be transported Item number: Deals with: to Australia n any customs duty payable on the importation of the car 18A Previously imported goods that are returned and add-ons after repair overseas under warranty n any GST payable on the importation of the car and add-ons, or provisions n if the importation of the car is GST-free, an amount equal to 18B Goods supplied free of charge to replace the amount of GST that would otherwise have been payable. goods or parts under warranty 18C Goods supplied free after a global safety recall 21 Goods, as prescribed by by-law, imported for repair, alteration or industrial processing and which are to be exported 24 Personal bequeathed goods that are not to be sold or to be used for purposes of trade.

10 Luxury car tax Quoting your ABN 04

In some circumstances you can quote your ABN (using an How to quote approved format) at the time you purchase or import a luxury Your quote must be made in the following format: car. By doing this, you can defer payment of LCT until the car is sold or imported at the retail level. Prescribed format for making a quotation

Who can quote? I hereby quote Australian business number ______You can quote your ABN to defer paying LCT when you in relation to the supply of the luxury car as detailed purchase or import a luxury car if all of the following apply: above/attached. n you are registered for GST Name of business: ______n you have an ABN, and n you intend to use the car for one of the following Name of person authorised to quote: ______purposes only Signature of person authorised to quote: ______– holding the car for trading stock, other than holding it for hire or lease Date: ______– carrying out research and development for the manufacturer of the car The quotation must be on, or attached to one of the following: – exporting the car where the export is GST-free n the order for the luxury car, or under GST law. n any other document provided to the supplier or Customs If you are a retail car dealer and you purchase a car to use only that clearly identifies the car, for example a contract, import as a demonstrator vehicle for potential customers to see or test warrant or letter. drive, you are holding the car as trading stock and can quote on It is up to you to have the quote in the approved format, printed the purchase of the car. on the relevant documentation or have the forms printed to If you are a business and import a luxury car with the intention meet your requirements. If the order or document the quote of restoring and selling it, you are holding it as trading stock. relates to has more than one car on it, you must clearly identify Provided you do not intend to use the car for any other the luxury cars the quote relates to. purpose, you are entitled to quote. Quotes to cover several purchases You are considered holding a car for purposes other than over time (periodic quotation) trading stock and will not be entitled to quote for it if you intend If you purchase several luxury cars in Australia over a period of to use the luxury car for any of the following reasons: time, you can give your supplier a single quote to cover all your n for personal use purchases for a period of 12 months or less. This is called a n for rally or race driving ‘periodic quotation of an ABN’. n for staff salary packaging n for promotion or sponsorship purposes you cannot use a periodic quotation when importing n as an executive vehicle, or luxury cars. n as a capital asset. This applies even if you intend to sell the car at a later date. The periodic quotation must be in the following format: If you have quoted your ABN and then use the luxury car for a non-quotable purpose, you must pay the LCT (see Periodic quotation format ‘Increasing change of use adjustment’ on page 13). I hereby quote Australian business number ______If you are not registered for GST, you cannot quote your ABN in relation to the supply of all luxury cars obtained by me in order to defer paying LCT on a luxury car. during the period ______to______inclusive, except luxury cars about which I notify you to the When to quote contrary at or before the time of their supply. You must quote your ABN at or before the time of your purchase or importation of the luxury car. You cannot quote Name of business: ______after buying the luxury car. Name of person authorised to quote: ______If you are charged LCT on a luxury car for which you were Signature of person authorised to quote: ______entitled to quote your ABN, you can claim an LCT adjustment on your activity statement, provided you are registered for LCT Date: ______as well as GST (see ‘Accounting for LCT’ on page 5).

Luxury car tax 11 04 Quoting your ABN

You do not need an approval from us to use a periodic Quoting on luxury cars you import quotation and any luxury car supplier can accept one If you enter a luxury car for home consumption, you must do for cars purchased in Australia. one of the following: You must be able to clearly identify each luxury car you n complete the approved Customs entry forms, including the purchased during the quotation period. If you plan to purchase sections about quotation of an ABN, or more luxury cars after the end of your specified quotation period, n provide Customs with a quotation in the following format: you will need to give your supplier a new periodic quotation. Customs quotation format Non-quotable purchases and periodic quotations Quotation under A New Tax System (Luxury Car Tax) Act 1999 During a period covered by a periodic quotation, you may need to buy a luxury car for a non-quotable purpose. You must tell I hereby quote my Australian business number: ______your supplier that the luxury car is to be used for a non-quotable in relation to the importations described on the entry lines purpose before you purchase it. The notification must be in the where I have indicated my intention to quote. following format:

you or your Customs agent must specify in writing Non-quotable purchases format (in the field provided on the Customs forms) the specific luxury car or cars that are being quoted for. The ABN must I hereby notify you that I am not quoting for the supply be entered in the field provided on the Customs forms. You of the following luxury car(s): can authorise a Customs agent to quote your ABN on your behalf, but you must do this in writing and you must make Description of car(s): ______sure that the agent quotes correctly under the LCT and Date of transaction: ______Customs law. Australian business number: ______Name of business: ______Who can sign a quote Name of person authorised The person who can sign a quote depends on the type of entity to make this declaration: ______they are quoting for, as outlined in the following table: Signature: ______Entity Who can sign Date: ______Individual That individual

If you do not tell the supplier that a car is to be used for a Partnership Any one of the partners resident in non-quotable purpose and obtain the car free of LCT, you Australia must account for it in your activity statement as an increasing Trust Any one of the trustees resident in change of use adjustment (see page 13). Australia, or if none is resident, their agent in Australia Company The public officer

If you are the person listed in the table and it is not possible or not practicable for you to sign the quotes, you may authorise someone else (the authorised person) to sign for you. The authorised person must have enough knowledge of the business to be able to speak for you. You do not have to tell us about the authorised person, but you must keep a record of your authorisation.

12 Luxury car tax Adjustments to LCT 05

What is an LCT adjustment? Decreasing change of use adjustment After you supply or import a luxury car, changes can sometimes You have a decreasing LCT adjustment for change of use occur that alter the amount of LCT you paid, or were liable to if all of the following apply: pay, in a previous tax period or after you purchase a luxury car. n you purchased or imported a luxury car An LCT adjustment can arise because of one of the following: n LCT was payable because you did not quote your ABN n an adjustment event n you were registered for GST at the time of supply or importation, and n a change of use of the car n you have used, and intend to use, the car only for a n a bad debt being written off or a debt being overdue for 12 months or more. quotable purpose. If a change like this occurs, you will need to make The decreasing LCT adjustment is equal to the amount of LCT an adjustment on your activity statement for the period that was payable on the supply or importation of the car. when either: n the change happens, or Example: Decreasing change of use adjustment n you find out about the change. Ranjan, a car dealer, did not quote when purchasing a luxury This adjustment will increase or decrease the net amount of car because the car was going to be used by the executives tax you are liable to pay to us. Adjustments can be made by of the dealership. As such, Ranjan paid LCT at the time of the supplier, a registered recipient or a registered importer. the purchase. However, when the car was delivered, Ranjan ended up holding it solely for trading stock and it was not An adjustment event used by the dealership executives. LCT adjustment events include: Ranjan can claim a decreasing LCT adjustment equal to the n the cancellation of the sale of the vehicle (for example, where amount of tax that was payable on his purchase of the car. LCT was previously paid on the sale of a luxury car and you and the purchaser agree to not go ahead with the sale) n an increase or decrease in the payment received for the sale Increasing change of use adjustment of a vehicle (for example, where you offer a purchaser a You have an increasing LCT adjustment for change of use if decrease through a volume discount, and the LCT on the either of the following apply: original price was accounted for in an earlier tax period. n You will need to calculate the LCT on the new price and the no LCT was payable because you quoted an ABN, or difference between the new LCT and the tax that has already n you had a decreasing LCT adjustment because of a change been paid is the amount of the adjustment), or of use, but you then used the car for a purpose other than a quotable purpose. n causing a sale of a luxury car to become, or stop being, a taxable supply. The increasing LCT adjustment will be equal to either: n the LCT that would have been payable on the supply or Change of use adjustments importation if you had not quoted, or Change of use adjustments occur where either you: n the previous decreasing LCT adjustment. n have quoted your ABN on a purchase or importation of a luxury car, but you then use the car for a non-quotable Example: Increasing change of use adjustment purpose, or n did not quote your ABN on a purchase or importation Monique, a car dealer purchased 10 luxury cars to be of a luxury car but should have because you intended held solely as trading stock and quoted her ABN to the to use, and have only used, the car for a quotable purpose. manufacturer. As such, she did not pay LCT. Monique later uses one of the cars as an executive vehicle, so For more information on quotable purposes, see the car is used for a purpose other than a quotable purpose. ‘Who can quote?’ on page 11. Monique has an increasing LCT adjustment equal to the amount of tax that she would have had to pay at the time of purchase.

Luxury car tax 13 05 Adjustments to LCT

Bad debt adjustments If you account for GST on a non-cash (accrual) basis, you can account for LCT on the supply of a luxury car before you receive any or all of the payment. If you later write off some or all of the payment due as a bad debt, or if a debt has been overdue for 12 months or more, you will have a decreasing LCT adjustment as you will not have received all the payment due on the supply. If you later recover some or all of the debt, you will need to make an increasing LCT adjustment to increase your net amount of LCT payable in the tax period in that you recovered some or all of the debt. The adjustment will be the amount of LCT payable on the amount recovered.

14 Luxury car tax Credits 06

Who can claim a credit for LCT REFUNDS FOR PRIMARY PRODUCERS Credits for LCT can only be claimed if you are not registered AND TOURISM OPERATORS for GST and are therefore not entitled to an adjustment. Special refunds may be available for some primary producers and tourism operators when buying luxury cars. Most primary You may claim a credit for LCT you have paid, or that has been 8 producers and tourism operators can claim refunds of 33 of the paid by the supplier of the luxury car if all of the following apply: 8 LCT they have paid, up to a maximum of $3,000. 33 is the n you have a credit entitlement difference between the current LCT rate of 33% and the n you are not registered, or required to be registered, previous LCT rate of 25%. for GST, and n no-one else has made a valid claim for a credit in relation to Primary producers can claim a refund of up to $3,000 for the credit entitlement. only one eligible car purchased or leased in a financial year. You have a credit entitlement if you have either: Tourism operators can claim a refund of up to $3,000 for each eligible car purchased or leased in a financial year. n overpaid LCT on a sale to you (for example, if the supplier charged more LCT than was payable) n paid LCT on a sale or importation for a quotable purpose, For more information on the refunds available for but you were unable to quote because you were unregistered primary producers and tourism operators, see: (for example, an unregistered company purchasing a luxury n GST and LCT on cars – for primary producers and car to conduct research and development for the tourism operators (NAT 72601) manufacturer of the car), or n Application for luxury car tax refund – primary producers n exported a luxury car which is a GST-free export. and tourism operators (NAT 72601).

HOW MUCH CREDIT CAN I CLAIM? The amount of credit you can claim is the amount of LCT: n you have overpaid n that would not have been charged by the supplier if you had quoted for the sale in question, or n that you would not have paid if you had quoted for the importation in question. These conditions apply only to the amount of LCT that you have not passed on in the sale price or have not already been credited with in respect of that amount.

HOW DO I CLAIM A CREDIT? A claim for a credit relating to an overpayment of LCT on the sale or importation of a luxury car must be made on the approved form which is available from us by phoning 1300 661 542. Your claim must be made within four years of becoming entitled to the credit. If the credit is claimed for overpayment of LCT on an importation, the credit claim must be made to the Australian Customs and Border Protection Service. If the credit is claimed for overpayment of LCT on a GST-free export, the credit claim should be made to the Australian supplier.

Luxury car tax 15 Cars purchased for people 07 with disabilities

LCT on cars used for transporting people LCT on cars purchased by people with with a disability a disability A car that is specially fitted out for transporting a disabled LCT will apply to a car purchased by a person with a disability person seated in a wheelchair is not considered a ‘luxury car’ if the value of the car is greater than the LCT threshold, even if and is not subject to LCT, provided the car is not GST-free. the car is GST-free. If the car is GST-free, it will be subject to LCT. LCT is not payable on modifications made to a car that are A car is GST-free up to the car limit if the supply is made to: made solely for the purpose of either: n a disabled veteran who intends to use the car for their n adapting it to be driven by a person with a disability, or personal transportation for a specified period, or n transporting a person with a disability. n a person who has a current disability certificate who intends When the LCT value of a car purchased by a person with a to use the car for transport to or from gainful employment for disability is worked out, the value does not include the value a specified period. of these modifications. The ‘specified period’ starts when a person purchases a car When the supply of a luxury car is GST-free up to the car limit, and ends at the earliest of one of the following: LCT is calculated as though GST had been payable. When you n two years after the purchase work out the LCT value, you must include an amount equal to n the time when the car is no longer reasonably capable of the amount of GST that would otherwise have been payable. being used for the purpose for which cars of that kind are This is called the notional GST. ordinarily used, or n a time that the we consider to be appropriate in special circumstances. The appropriate time is the period from the For more information on how GST and LCT applies to date of supply, which is usually the date of delivery to the cars purchased by people with a disability, refer to GST and customer, until the car has been used by the eligible person LCT on cars you buy – a guide for people with disabilities with a disability to travel 40,000km. (NAT 4325). To purchase the car GST-free, the purchaser must give the supplier either a: n Declaration for an exemption of GST on a car or car parts – person with a disability who is gainfully employed (NAT 3419) form, or n Declaration for an exemption of GST on a car or car parts – disabled veterans (NAT 3418) form. A person who is entitled to purchase a car GST-free can also purchase car parts for their car GST-free by giving the supplier the same declaration form.

Car parts do not cover things such as oils and other consumables, only physical parts that can be affixed to the car.

If the car is not GST-free and has been modified for transporting a person with a disability seated in a wheelchair, the person buying the car can give the supplier a Declaration for an exemption from luxury car tax – cars used for transporting people with a disability in wheelchairs (NAT 3420) form.

16 Luxury car tax 07 Cars purchased for people with disabilities

Example: Working out the LCT and GST payable when Example: Working out the total price of a car when the the sale of the car is partly GST-free sale of both the car and the modifications are GST-free

Mary has a current disability certificate and wants to buy a Matthew has a current disability certificate and wants to new luxury car for travel to and from paid work for at least the buy a new car for travel to and from paid work for at least next two years. The car is valued at $80,000 without GST or the next two years. The normal purchase price of the car LCT. The sale of the car to Mary is GST-free (on the value up including GST is $55,000 (the GST-inclusive market value), to the car limit). The value above the car limit is subject to which is under the LCT threshold of $57,466 for the GST and LCT. 2011–12 financial year. 1 Calculate the LCT value: Matthew asks the dealer to modify the car by adding hand Value of the car + (notional) GST controls so that he can drive it. These modifications add 1 $25,000 (exclusive of GST) to the purchase price of the car. = $80,000 + (10 × $80,000) = $80,000 + $8,000 The sale of the car, with modifications, to Matthew is = $88,000 GST-free and LCT free. In working out the GST and LCT value of the car, you do not 2 Calculate the amount that is above the LCT threshold: include the price of modifications made solely to enable the LCT value – LCT threshold car to be driven by a person with a disability, or to transport $88,000 – $57,466 = $30,534 a person with a disability. 3 Exclude the GST included in the amount above the Matthew will have to pay the GST-exclusive price of the LCT threshold: car plus the price of the modifications: $30,534 × 10 = $27,758.18 11 = $50,000 (GST-exclusive price) + $25,000 4 Calculate the GST payable by multiplying $27,758.18 (the price of the modifications excluding GST and LCT) by 10%: 1 = $75,000 $27,758.18 × 10 = $2,775.82 5 Calculate 33% of the amount above the LCT threshold less GST: 33 $27,758.18 × 100 = $9,160.20 Therefore the GST payable on the value of the car above the car limit is $2,775.82 and the LCT is $9,160.00 6 Calculate the total amount Mary needs to pay: Value of the car + GST + LCT $80,000 + $2,775.82 + $9,160.00 = $91,935.82

Luxury car tax 17 08 Emergency vehicles

For LCT purposes, the following vehicles are considered Certification for emergency vehicles emergency vehicles: If you supply an emergency vehicle, you must get a statement n a vehicle that is registered in a state or territory as an from the purchaser certifying that the vehicle will only be used emergency vehicle as an emergency vehicle. n an ambulance This statement must be made in the following format: n a mobile intensive care ambulance (MICA) or similar vehicle that is: – fitted with a siren and flashing warning lights, and Emergency vehicles format – used to transport paramedics and equipment to the site of an accident A New Tax System (Luxury Car Tax) Regulations 2000 Certification to the Commissioner of Taxation Acquisition n a fire fighting vehicle that: of emergency vehicle – is designed, permanently fitted out and equipped for the purpose of fighting and preventing fires, and I hereby certify that this vehicle is a prescribed emergency – has external markings that identify it as a fire fighting vehicle vehicle used for emergency purposes and is not subject to n a police vehicle that is equipped with a siren and flashing luxury car tax. warning lights Description of vehicle: ______n an emergency response or search and rescue vehicle that: Emergency purpose of vehicle: ______– is designed and permanently fitted out for the purpose of emergency response or search and rescue operations, and Date of acquisition: ______– has external markings that identify it as a vehicle of that kind Name of authorised person making this statement: ______n a vehicle that: – is designed and permanently fitted out for the purpose Name of entity or organisation: ______of responding to and dealing with an environmental Signature: ______emergency, and – has external markings that identify it as a vehicle of that kind Date: ______n a vehicle that is purchased for immediate modification or conversion into a vehicle mentioned in one of the items above before its first use, or n an ambulance or similar vehicle that is specially equipped for carrying sick or wounded animals.

18 Luxury car tax Definitions

Associates Associates include people and entities closely associated with For more information, refer to GSTR 2000/31 Goods you, such as: and services tax: supplies connected with Australia. n relatives, or n closely connected companies or trusts. A partner in a partnership is an associate of the partnership. Consideration (See ‘Payment’ on page 20) Australian business number (ABN) Demonstrator vehicle An ABN is your identifier for your dealings with the us A demonstrator vehicle is a designated car that is held by a retail and for future dealings with other government departments car dealer at their premises and used to demonstrate a particular and agencies. This is in addition to and is different to your make and model of car that is part of the trading stock that they tax file number. sell to retail customers. Business (enterprise) Enter for home consumption An enterprise includes a business. It also includes other Generally, GST and LCT must be paid by the importer at the commercial activities but does not include: same time and in the same way as customs duty. This is n private recreational pursuits or hobbies collected by Australian Customs and Border Protection Service at n activities carried on as an employee, labour hire worker, the time the goods are ‘entered for home consumption’. That is, director or office holder, or when an import declaration is communicated to the Australian Customs and Border Protection Service for goods that have been n activities carried on by individuals (other than trustees of charitable funds) or partnerships (in which all or most of the imported and have arrived at a port or airport in Australia. partners are individuals) without a reasonable expectation Enterprise (see ‘Business’ above) of profit. It includes the activities of entities such as charities, deductible Entity gift recipients, religious and government organisations and certain An entity can be any of the following: non‑profit organisations. n an individual (for example a sole trader) n a body corporate Car n a corporate sole (an ongoing paid office, for example, LCT legislation defines car as a ‘motor vehicle’ (except a a bishopric) motorcycle or similar vehicle) designed to carry a load of less n than two tonnes and less than nine passengers. It includes: a body politic n a partnership n passenger cars n n station wagons an unincorporated association or body of persons n n four-wheel drive vehicles, and a company n n limousines. a trust, or n a superannuation fund. It does not include: n trucks and vans designed to carry a load of more than Fuel-efficient cars two tonnes A fuel-efficient car has a fuel consumption that does not exceed n buses designed to carry nine or more passengers, or seven litres per 100 km. This is as a combined rating under the n racing and rally cars that are not used as road vehicles and vehicle standards in force under section 7 of the Motor Vehicle cannot be registered for use on public roads in any country in Standards Act 1989. the world. The fuel-efficient car limit for the 2011–12 financial year Car limit is $75,375. The car limit is an amount determined by tax law for the relevant financial year. It is used to calculate depreciation deductions GST-inclusive market value under the income tax law. GST-inclusive market value means the market value of the sale or purchase without any discount for the amount of GST (if any) Connected with Australia payable on the sale. A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient Gross vehicle mass (GVM) of the sale. The maximum laden mass of a motor vehicle as specified by A supply of a service is typically ‘done’ where the service is the manufacturer and stated in the vehicle’s brochure. performed. If the service is performed in Australia, the service ‘done’ in Australia and the supply of that service is connected with Australia. This is the case even if the recipient of the supply is outside Australia.

Luxury car tax 19 Definitions

Importation n conducting operations relating directly to taking or culturing Generally, a person makes an importation of goods into Australia pearls or pearl shell under the GST Act, if: n planting or tending trees in a plantation or forest, intended n the person enters the goods for home consumption (within the to be felled meaning of the Customs Act 1901), and n felling trees in a plantation or forest, or n at the time they are entered for home consumption, the person n transporting trees, or parts of trees, that you felled in is the owner of the goods (within the meaning of the Customs a plantation or forest to either the place Act 1901). – where they are first to be milled or processed, or Laden mass – from which they are to be transported, to the place where The mass of a vehicle and its load, borne on the surface on which they are first to be milled or processed. it is standing or running. Private buyer/seller Net amount An individual who is not in business and is not registered, The net amount is the sum of GST attributable to the tax period, or required to be registered, for GST. less the GST input tax credits that are attributable to that period. The amount of luxury car tax payable by you is included in your Retail level net amount. The level of supply to a customer who is not entitled to quote an ABN. Payment (consideration) Payment has wide meaning for GST purposes. Any payment Tare mass (in money or kind) made in return for a supply is consideration. The mass of a vehicle, (other than an L-group vehicle), that is all It includes doing something or not doing something in response of the following: to a supply, or to get someone to make a supply. n ready for service, unoccupied and unladen n with all fluid reservoirs filled to nominal capacity except for fuel, Price which should be 10 litres only, and The term ‘price’ for GST purposes is the sum of: n with all standard equipment and any options fitted. n the payment for the supply expressed as an amount of money – the amount without any discount for the amount Tare mass is also known as ‘kerb mass’ or ‘unladen mass’. of GST, if any, payable on the supply, and (L-group vehicles include mopeds, motorcycles and motor n the payment not expressed as an amount of money – tricycles as listed in the Australian Design Rules). the GST‑inclusive market value of that consideration. Price for LCT purposes is generally the amount of money paid for Taxable importation the car; however this is not always the case. If the payment for GST is payable on goods imported into Australia unless the the supply is not in money, or not only in money, the price is goods are duty-free under certain customs duty concessions worked out according to the dot points above. or would have been GST-free or input taxed if they had been supplies. GST is payable on taxable importations regardless The price should exclude any amounts of LCT included in the of whether you are registered or required to be registered for supply and any other Australian tax, fee or charge, other than GST purposes. GST and customs duty. Tourist activity Primary production business Means an activity that: You carry on a primary production business if you carry on n is a leisure activity a business of any of the following: n is of a touring nature, and n cultivating or propagating plants, fungi or their products or parts n (including seeds, spores, bulbs and similar things) in does not involve the transporting of passengers by either: any physical environment – taxi or limousine for fares, or n maintaining animals for the purpose of selling them or their – a hire car service. bodily produce (including natural increase) A ‘leisure activity’ includes an activity involving a visit by a tourist n manufacturing dairy produce from raw material that to a site that is of: you produced n scenic beauty n conducting operations relating directly to taking or catching n cultural interest fish, turtles, dugong, beche-de-mer, crustaceans or n environmental interest aquatic molluscs n historical interest, or n recreational interest.

20 Luxury car tax More information

For more information, or a copy of our publications: n visit our website at www.ato.gov.au n phone 13 28 66 n write to us at Australian Taxation Office PO Box 3524 ALBURY NSW 2640 If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50. If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below: n TTY users, phone 13 36 77 and ask for the ATO number you need n Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need n internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.