From 1 July 2019 the following car threshold amounts apply.

Luxury Car Tax

Luxury car tax is a tax of 33% imposed on luxury cars over the luxury car tax threshold, which is indexed annually. Luxury car tax is generally payable when a car is sold or imported at the retail level. It is in addition to any goods and services tax (GST) payable.

The Victorian Luxury Car Tax (LCT) threshold was previously set to $66,331, however from 1 July 2019 the tax threshold for luxury cars has increased to $67,525. The threshold for fuel efficient luxury cars for the 2019–20 financial year remains at $75,526.  The impact is that any vehicles priced above the new threshold will incur LCT stamp duty of $10.40 per $200, up from $8.40 per $200 in the 2018/2019 financial year. Further, vehicles priced between $100,000 and $150,000 will attract a tax of $14 per $200 and, vehicles priced above $150,000 will incur $18 per $200.

If you buy a car with a GST-inclusive value above these LCT thresholds, you must pay LCT. In general, the value of a car includes the value of any parts, accessories or attachments you supplied, or imported, at the same time as the car.

LCT applies to the sales of cars that are two years old or less. A car is more than two years old at the time of supply if it was manufactured locally or imported more than two years previously.

You are required to pay LCT if you’re registered or required to be registered for GST and, you sell or import a luxury car.  This includes retailers, wholesalers, manufacturers and other businesses that sell luxury cars.  You also have to pay LCT if you’re an individual (private buyer) who imports a luxury car.

Depreciation for Business Use of Your Car

There’s an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.

The car limit for 2019–20 is $57,581.

Goods and Services Tax (GST)

Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.

You can’t claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

If you have any questions or need advice and clarity specific to your business, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.