If you’re buying a luxury car in Australia, there’s more to the total costs than just a hefty price tag or expensive repair work. Depending on the value of the vehicle you want to buy, you could be stung with a luxury car tax.
Luxury car tax isn’t the same as stamp duty, which is calculated individually by each state. Instead, the National Government sets a threshold limit for different vehicle types each financial year to determine how much extra you’ll have to pay on your expensive car.
Here’s the lowdown on how it works, and how much it might cost you at the dealership.
Luxury Car Tax (which we’ll call LCT to make it simpler) is the tax you’ll pay on when the vehicle you purchase exceeds what is called the LCT Threshold.
You can visit the ATO website to find the current LCT Threshold limits but as it stands:
|Financial Year||Fuel efficient vehicles||Other vehicles|
Calculating your LCT is relatively simple. You pay 33% of the amount that exceeds the LCT Threshold, and here’s how you can calculate it in a few minutes.
Here’s a super quick example:
On a $100,000 vehicle which is not classed as fuel-efficient, your LCT will be $9,254.40.
LCT will almost always be included in the quoted price of the vehicle when buying from a dealership. The dealership will pay the LCT to the ATO on your behalf as part of the sale process.
Refunds can be claimed by the individual or business through the ATO.
There are a few ways that you can save on paying LCT.
The first is to claim a refund on your LCT if you are eligible to do so. Primary producers and tourism operators may be able to claim up to $3,000 on their LCT.
The second is to buy a fuel-efficient vehicle. The LCT Threshold for fuel-efficient vehicles is significantly higher than for non-fuel-efficient vehicles, so if you’re looking to do your part for the planet and save on cash, then this is an option to consider.
Lastly, if the vehicle you are buying isn’t a passenger vehicle, or is a modified vehicle designed for specific use (e.g. transporting wheelchair passengers) then the vehicle may be exempt from LCT.
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.
We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with tools like our Budget Planning Spreadsheet to help you better manage and understand personal finance.