What classifies as a luxury car?

A luxury car, in terms of the LCT, refers to any vehicle priced above the current LCT threshold. This doesn’t just apply to high-end European brands like Audi, BMW or Range Rover – it can also include premium models from brands like [Nissan](/car-loans/nissan) and [Toyota](/car-loans/toyota), such as the Patrol, LandCruiser and Prado Kakadu.

Is LCT applicable on used cars?

LCT generally applies to vehicles that are less than two years old at the time of sale or import. According to the [ATO](https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/luxury-car-tax/working-out-the-lct-amount/cars-on-which-lct-has-already-been-paid), if LCT has already been paid, a resale within that two-year period may still attract additional LCT if the vehicle's value has increased.

What is the luxury car limit on a novated lease?

Yes, there is a luxury car limit that applies to [novated leases in Australia](/car-loans/novated-lease/), primarily affecting tax deductions and [fringe benefits tax (FBT)](/car-loans/novated-lease/fbt-explained) calculations. When entering into a novated lease: - The lease payments may include LCT if the vehicle’s value exceeds the LCT threshold. - Your employer can claim deductions for lease expenses up to the car depreciation limit (currently $69,674). Any amount above this limit is not deductible. - The taxable value of the car fringe benefit provided to you (the employee) is also based on the car’s cost, capped at the depreciation limit. It's important to note that while you can lease a vehicle exceeding these thresholds, the tax benefits may be limited. Therefore, when considering a novated lease for a luxury vehicle, it's best to talk to a financial advisor or tax professional to fully understand the implications.

Are electric vehicles exempt from LCT?

Electric vehicles (EVs) are not automatically exempt from Australia's Luxury Car Tax. Whether LCT applies depends on the vehicle's price and whether it exceeds the LCT threshold for fuel-efficient vehicles. For the 2025–26 financial year, the LCT threshold for fuel-efficient vehicles is $91,387. If an EV's GST-inclusive value exceeds this amount, LCT is payable at a rate of 33% on the amount above the threshold.

Is LCT tax deductible?

LCT is not tax deductible in the traditional sense for most individuals. However, for businesses registered for GST that purchase a luxury vehicle for business use, the LCT can typically be included as part of the vehicle's cost base for depreciation purposes. This means it may be claimed over time as a business expense under the depreciation rules, rather than being directly deductible upfront. Always consult with a tax professional to ensure you meet the ATO’s eligibility requirements.

The Luxury Car Tax is not technically a tariff, but it functions in a similar way in some respects. - A tariff is a tax imposed on imports, typically to protect domestic industries by making imported goods more expensive. - The LCT, on the other hand, is a domestic tax applied to luxury vehicles (both imported and locally-made, though local production has now ceased). It is not limited to imports.

Luxury Car Tax (LCT) Rates & Thresholds For 2025

The Federal Government is reportedly considering phasing out the Luxury Car Tax (LCT) as part of its negotiations for a free trade agreement with the European Union.

Rather than eliminating the tax immediately, the government is exploring a gradual reduction to protect vehicle resale values and maintain market stability.

LCT currently applies a 33% tax on the value of vehicles above certain thresholds – $80,567 for most cars and $91,387 for fuel-efficient models.

Approximately 40% of the $1.2 billion annual LCT revenue is generated from European vehicle sales, as reported by The Australian.

What is the Luxury Car Tax (LCT)?

The Luxury Car Tax (LCT) is a 33% tax applied to the portion of a car’s price that exceeds a set threshold, targeting higher-end vehicles. It applies to both new and near-new cars under two years old, as well as older vehicles that were imported into Australia less than two years ago.

Here’s how LCT works:

Thresholds are set by the Australian Taxation Office (ATO), which are currently $91,387 for fuel-efficient vehicles (3.5L per 100km or less) and $80,567 for other vehicles.

The tax rate is 33% and is charged only on the portion of the car’s value above the LCT threshold.

LCT is usually included in the car’s drive-away price and collected by the dealer or importer.

Not all vehicles are subject to LCT, such as those designed to carry more than two tonnes or nine passengers.

LCT isn’t the same as stamp duty, which is calculated individually by each state. Instead, the ATO sets the LCT threshold for different vehicle types each financial year to determine how much extra you’ll have to pay on your car.

Financial year	2025-26
Fuel-efficient vehicles	$91,387
Other vehicles	$80,567
Financial year	2024-25
Fuel-efficient vehicles	$91,387
Other vehicles	$80,567
Financial year	2023-24
Fuel-efficient vehicles	$89,332
Other vehicles	$76,950
Financial year	2022-23
Fuel-efficient vehicles	$84,916
Other vehicles	$71,849
Financial year	2021–22
Fuel-efficient vehicles	$79,659
Other vehicles	$69,152
Financial year	2020–21
Fuel-efficient vehicles	$77,565
Other vehicles	$68,740
Financial year	2019–20
Fuel-efficient vehicles	$75,526
Other vehicles	$67,525
Financial year	2018–19
Fuel-efficient vehicles	$75,526
Other vehicles	$66,331
Financial year	2017–18
Fuel-efficient vehicles	$75,526
Other vehicles	$65,094
Financial year	2016–17
Fuel-efficient vehicles	$75,526
Other vehicles	$64,132
Financial year	2015–16
Fuel-efficient vehicles	$75,375
Other vehicles	$63,184
Financial year	2014–15
Fuel-efficient vehicles	$75,375
Other vehicles	$61,884
Financial year	2013–14
Fuel-efficient vehicles	$75,375
Other vehicles	$60,316
Financial year	2012–13
Fuel-efficient vehicles	$75,375
Other vehicles	$59,133
Financial year	2011–12
Fuel-efficient vehicles	$75,375
Other vehicles	$57,466

Financial year	Fuel-efficient vehicles	Other vehicles
2025-26	$91,387	$80,567
2024-25	$91,387	$80,567
2023-24	$89,332	$76,950
2022-23	$84,916	$71,849
2021–22	$79,659	$69,152
2020–21	$77,565	$68,740
2019–20	$75,526	$67,525
2018–19	$75,526	$66,331
2017–18	$75,526	$65,094
2016–17	$75,526	$64,132
2015–16	$75,375	$63,184
2014–15	$75,375	$61,884
2013–14	$75,375	$60,316
2012–13	$75,375	$59,133
2011–12	$75,375	$57,466

Source: ATO

Why is there a tax on luxury cars?

The Luxury Car Tax was introduced in Australia in 2000 to support the local car manufacturing industry by making imported luxury vehicles more expensive. But since local manufacturing ended in 2017, many now question whether the tax is still necessary.

The Albanese government has proposed phasing out the LCT as part of a free trade deal with the European Union. The goal is to improve trade opportunities – particularly for Australian agriculture – and modernise outdated tax policies.

If the tax is removed, buyers could see noticeable savings on premium and European cars, with prices potentially dropping by thousands of dollars. Supporters say this would make luxury vehicles more affordable, while critics argue the change mainly benefits wealthier Australians and won’t help everyday buyers.

We spoke to Jordan Mulach at Torquecafe.com to get his thoughts on whether LCT has outstayed its welcome.

Jordan Mulach, Motoring Editor at Torquecafe.com

“Personally, I see the repeal of LCT as a positive for consumers, not only because there is no longer a local manufacturing industry to protect, but its implementation – such as being applied to options as well as the base price of a vehicle – has been far from perfect. I don't think it will have major impacts on the resale value of most cars, as a majority of the vehicles impacted by the LCT would either 1) be only slightly over and not incur that much extra tax, 2) already suffer significant depreciation or 3) be high-value, sought-after vehicles which turn up for sale above the RRP anyway.”

Jordan Mulach, Motoring Editor at Torquecafe.com

Here’s how you can calculate your LCT:

1

Start with the car’s purchase price

Begin with the total purchase price of the vehicle, including GST. Don’t include extras like stamp duty, registration or car insurance.

2

Subtract the LCT threshold

Deduct the relevant LCT threshold from the purchase price to find the taxable portion. Example: $90,000 - $80,567 = $9,433.

3

Remove the GST component

To calculate the GST-exclusive portion, divide the result by 1.1. Example: $9,433 ÷ 1.1 = $8,575.

4

Calculate the LCT Payable

Multiply the GST-exclusive amount by 33% to determine the Luxury Car Tax owed. Example: $8,575 x 0.33 = $2,830.

For a $90,000 vehicle that isn’t classified as fuel-efficient, your Luxury Car Tax would be approximately $2,830. Electric and fuel-efficient vehicles have a higher LCT threshold. The more your car exceeds its threshold, the more LCT you’ll pay.

Here are some popular car manufacturers and models in Australia where LCT may apply.

Vehicle	Ford Ranger - Raptor 3.0 (4x4)
Car purchase price (excluding on-road costs)	$90,440
LCT threshold	$80,567
Approximate LCT cost	$2,962
Vehicle	Nissan Patrol - Warrior (4x4)
Car purchase price (excluding on-road costs)	$105,660
LCT threshold	$80,567
Approximate LCT cost	$7,528
Vehicle	Volvo EX90
Car purchase price (excluding on-road costs)	$124,990
LCT threshold	$91,387
Approximate LCT cost	$10,081
Vehicle	Volkswagen Touareg - R Ehybrid (phev)
Car purchase price (excluding on-road costs)	$129,990
LCT threshold	$91,387
Approximate LCT cost	$11,581
Vehicle	Toyota LandCruiser - LC300 Sahara ZX (4x4)
Car purchase price (excluding on-road costs)	$145,791
LCT threshold	$80,567
Approximate LCT cost	$19,567
Vehicle	Mercedes-Benz GLE-Class - 450 D 4Matic
Car purchase price (excluding on-road costs)	$154,900
LCT threshold	$80,567
Approximate LCT cost	$22,300
Vehicle	Audi SQ7 - TFSI quattro
Car purchase price (excluding on-road costs)	$174,815
LCT threshold	$80,567
Approximate LCT cost	$28,274

Vehicle	Car purchase price (excluding on-road costs)	LCT threshold	Approximate LCT cost
Ford Ranger - Raptor 3.0 (4x4)	$90,440	$80,567	$2,962
Nissan Patrol - Warrior (4x4)	$105,660	$80,567	$7,528
Volvo EX90	$124,990	$91,387	$10,081
Volkswagen Touareg - R Ehybrid (phev)	$129,990	$91,387	$11,581
Toyota LandCruiser - LC300 Sahara ZX (4x4)	$145,791	$80,567	$19,567
Mercedes-Benz GLE-Class - 450 D 4Matic	$154,900	$80,567	$22,300
Audi SQ7 - TFSI quattro	$174,815	$80,567	$28,274

Note, this is a general guide only and may not reflect the actual LCT you pay.

When and how do you pay LCT?

LCT is typically included in the advertised or quoted price when buying a vehicle from a dealership. In most cases, you won't need to calculate or pay it separately – the dealer is responsible for paying the LCT directly to the ATO as part of the sale process.

If you’re importing a luxury vehicle privately, you may need to pay LCT yourself if the car’s value (including GST and customs duty) exceeds the applicable threshold. This payment is usually made through the Department of Home Affairs during the import process.

Refunds or exemptions may be available in certain situations – for example, if you’re an eligible primary producer, tourism operator, or if the car meets specific criteria for exemption. These are typically processed by lodging a claim with the ATO, either as an individual or a business.

There are several ways to reduce or avoid paying LCT, depending on your situation and the type of vehicle you purchase:

Claiming an LCT Refund: Certain eligible buyers, such as primary producers and tourism operators, may be entitled to claim a refund on part of their LCT – up to $3,000. To access this benefit, you’ll need to apply through the ATO and meet specific eligibility criteria.

Choose a fuel-efficient vehicle: Fuel-efficient vehicles benefit from a higher LCT threshold compared to non-fuel-efficient cars. This means you can purchase a more expensive fuel-efficient car before LCT applies, potentially saving you thousands. According to the ATO, a fuel-efficient vehicle is defined as one that uses no more than 3.5 litres of fuel per 100 kilometres.

Look for LCT exemptions: Not all vehicles are subject to LCT. Vehicles that are not classified as passenger cars, or specially modified vehicles designed for specific purposes – such as transporting wheelchair users – may be exempt from paying LCT altogether.