How to Calculate Luxury Car Tax in 2024

The luxury car tax (LCT) is a tax imposed on the sale and import of new cars valued over a certain threshold, which is paid to the Australian Taxation Office (ATO). This tax applies not only to domestic sellers but importers as well. Generally, the sellers pass the cost of this taxon to the buyer. LCT is to target the purchase of new luxury cars, making sure that the high-value transactions contribute to additional revenue.

Put simply, when a new car exceeds a certain value, the amount exceeding the threshold is subject to a tax rate of 33%.

When do you need to pay luxury car tax?

If you are importing/selling a vehicle that is less than two years old, then you may be required to pay luxury car tax. The tax applies to individuals, companies, and other entities provided the car meets the following criteria:

1. Vehicle Type: The vehicle must be a passenger car designed to carry a load of fewer than two tonnes and less than nine passengers. This includes limousines, which are exempt from the passenger limit.

2. Value Threshold: The value of the car, which includes dealer delivery and any extras, must exceed the luxury car tax threshold. Differing thresholds apply based on the fuel efficiency of the vehicle.

3. Purpose of Purchase: The vehicle must not be a work of art or purchased solely for display purposes.

4. Disability Modifications: While cars purchased by individuals with disabilities are subject to the tax, any modifications made to the vehicle to accommodate the disability are exempt from the LCT.

Meeting all of the above criteria means that you are required to pay luxury car tax on the vehicle.

Value Thresholds for Luxury Car Tax

For the 2023-24 financial year, the thresholds have been set at the following levels:

• Fuel-Efficient Cars: $89,332.
• Non-Fuel-Efficient Cars: $76,950.

What is a Fuel-Efficient Car?

A fuel-efficient car is a motor vehicle that has a combined fuel consumption of 7 litres per 100km or less. In the case of the luxury car tax, these cars are subject to higher tax thresholds that are set due to their lower environmental impact.

How to Calculate Luxury Car Tax

In order to calculate LCT, you need to follow these steps:

1. Determine the Supply Price: This is the total price of the car, including optional extras, dealer delivery, and other charges.

2. Calculate the Amount Exceeding the LCT Threshold: Identify if the car is fuel-efficient and determine the relevant threshold. Subtract the threshold from the supply price to find the amount that exceeds the threshold.

3. Remove GST from the Excess Amount: Calculate the excess amount (the amount above the threshold) and remove the GST portion from this amount.

4. Multiply by the LCT Rate: The current LCT rate is 33%. Multiply the GST-exclusive excess amount by this rate.

Example Calculation

For example, if you are selling a non-fuel-efficient car with a supply price of $100,000, here is how you would calculate the LCT payable:

1. Supply Price: $100,000

2. Amount Exceeding LCT Threshold:

• Threshold for non-fuel-efficient cars: $76,950
• Amount exceeding threshold: $100,000 - $76,950 = $23,050

3. Remove GST from the Excess Amount:

• GST-exclusive excess amount: $23,050 / 1.1 = $20,954.55

4. Multiply by LCT Rate:

• LCT payable: $20,954.55 × 0.33 = $6,915.00

The luxury car tax payable for a non-fuel-efficient car with a supply price of $100,000 would be $6,915.00.