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1 Guide for taxpayers with a luxury car tax obligation Luxury car tax For more information visit NAT

2 Our commitment to you We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. If you follow our information in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it but we will not charge you a penalty. Also, if you acted reasonably and in good faith we will not charge you interest. If you make an honest mistake in trying to follow our information in this publication and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest. If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to. 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 or contact us. This publication was current at April Terms we use When we say: n sale, we mean the goods and service tax (GST) term supply n purchase, we mean the GST term acquisition n GST credits, we mean the GST term input tax credits n payment (made or received), we mean the GST term consideration. When we say luxury car tax (LCT) paid, we mean either LCT that: n has already been paid n is due to be paid but has not been paid yet. Some terms used in this guide may be new to you. They are explained in Definitions on page 19. Australian Taxation Office for the Commonwealth of Australia, 2012 You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Published by Australian Taxation Office Canberra April 2012 JS 23572

3 Contents 01 Getting started 3 What is LCT? 3 The LCT threshold 3 What is a luxury car? 3 Fuel-efficient cars 3 Working out your vehicle s load 3 Who is liable for LCT? 3 Accounting for LCT 5 Your activity statement 5 Registering for LCT 5 What cars are not subject to LCT? 5 What is a commercial vehicle? 5 Vehicles that carry both passengers and goods 6 02 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 How to work out LCT 7 Cars that have already been subject to LCT 8 Other situations 9 03 Importing luxury cars 10 When are luxury car imports subject to LCT? 10 When are luxury car imports not subject to LCT? 10 When must LCT be paid on an importation? 10 How to work out the LCT payable on an importation Quoting your ABN 11 Who can quote? 11 When to quote 11 How to quote 11 Quotes to cover several purchases over time (periodic quotation) 11 Non-quotable purchases and periodic quotations 12 Quoting on luxury cars you import 12 Who can sign a quote Adjustments to LCT 13 What is an LCT adjustment? 13 An adjustment event 13 Change of use adjustments 13 Bad debt adjustments 14 Luxury car tax 1

4 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 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 Emergency vehicles 18 Certification for emergency vehicles 18 Definitions 19 MORE INFORMATION inside back cover 2 Luxury car tax

5 Getting started 01 What is LCT? LCT is a tax of 33% imposed on the GST-inclusive value of luxury cars over the relevant LCT threshold. You must generally pay LCT when you sell or import a luxury car. You must pay LCT as well as any GST payable. For more information, see LCT payable on supplying a luxury car on page 7. Special refunds may be available for some primary producers and tourism operators in relation to luxury cars they buy, see Who can claim a credit for LCT on page 15. The LCT threshold The LCT thresholds for the financial year are: n $57,466, which is equal to the car limit n $75,375 for fuel-efficient cars. The car limit is: n used to work out depreciation deductions under tax law n reviewed each financial year and may change. 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. What is a luxury car? A luxury car is a car with a GST-inclusive value above the LCT threshold. Under LCT law, a car is a motor powered road vehicle that is designed to carry the following: n a load of less than two tonnes n less than nine passengers. It includes: n passenger cars n station wagons n four-wheel drive vehicles n limousines regardless of the number of passengers they are designed to carry. The term car does not include: n trucks and vans designed to carry a load of more than two tonnes n vehicles, such as buses, designed to carry nine or more passengers n motorcycles or similar vehicles n racing and rally cars that are not road vehicles and cannot be 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. Fuel-efficient cars The LCT threshold for a fuel-efficient car is known as the fuel-efficient car limit. The fuel-efficient car limit is $75,375 for the financial year and applies to either of the following: n the year that the supply of the car occurred n the date when the car was entered for home consumption. Fuel-efficient cars with a GST-inclusive value below $75,375 are not considered luxury cars. Working out your vehicle s load To work out the load your vehicle can carry, you need to know the tare mass and the gross vehicle mass (GVM). The tare mass is the mass of your vehicle: n when it is empty n with less than ten litres of fuel and other fluids in it n with all standard equipment and any options fitted. The GVM is what the manufacturer says the maximum mass of your vehicle is. To work out the load your vehicle can carry, subtract the tare mass from the GVM. For more information about vehicle loads, visit the Department of Infrastructure and Transport website at Who is liable for LCT? You must pay LCT if both of the following apply: n you are registered, or required to be registered, for GST 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

6 01 Getting started The rate of LCT that applies to you can vary depending on: n when your car was ordered n when your car was delivered n the type of car (for example, whether it is fuel-efficient), and n whether you are a primary producer or tourism operator. Use this table if you are a motor vehicle dealer or importer, or are purchasing a car that is subject to LCT, and want to work out which rate applies to you. Fuel-efficient cars under $75,375 Cars over the LCT threshold (including GST), and Fuel-efficient cars $75,375 or over. Cars subject to LCT purchased by primary producers Cars delivered or imported* before 1 July 2008 Cars delivered or imported* on, or after, 1 July 2008 and before 3 October % LCT applies 33% LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May % LCT applies 33% LCT tax applies, or 25% for cars contracted before 7.30pm AEST on 13 May % LCT applies 33% LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May Primary producers can claim a refund of LCT from us of up to $3,000 on one eligible car per financial year. Cars delivered or imported* after 3 October 2008 LCT does not apply. 33% LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May % LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May Primary producers can claim a refund of LCT from us of up to $3,000 on one eligible car per 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 purchased by tourism operators 25% LCT applies 33% LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May Tourism operators can claim a refund of LCT from us of up to $3,000 on eligible cars. 33% LCT applies, or 25% for cars contracted before 7.30pm AEST on 13 May Tourism operators can claim a refund of LCT from us of up to $3,000 on eligible cars. 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). * 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

7 01 Getting started Accounting for LCT You account for the LCT when completing your activity statement for the tax period which applies for GST. You cannot claim GST credits for LCT, regardless of whether you use the luxury car for business or private purposes. Your activity statement If you are registered for GST, you must include any LCT you are liable to pay on your activity statement. You complete the LCT section of your activity statement for the period in which you make a taxable supply of a luxury car or make an adjustment to LCT you were previously liable to pay. For more information, refer to Luxury car tax how to complete your activity statement (NAT 7391). These instructions include a section on reporting taxable supplies of luxury cars with examples and a worksheet and also show how to calculate adjustments. Registering for LCT Generally, if you operate a business that sells cars, you will have an Australian Business Number (ABN) and be registered for GST. To register for LCT, tick the LCT box when you apply for your ABN and GST registration. If you are already registered for GST and find that you have to pay (or can receive a refund of) LCT, you must complete an Add a new business account (NAT 2954) form. What cars are not subject to LCT? You do not have to pay LCT on a car with a value above the LCT threshold if it is any of the following: n manufactured in Australia more than two years before the supply n imported and it was entered for home consumption more than two years before the supply n an emergency vehicle (see Emergency vehicles on page 18) n not GST-free and is specifically fitted out for transporting people with a disability who are seated in wheelchairs (see Cars purchased for people with a disability on page 16) n a motor home or campervan n a commercial vehicle. What is a commercial vehicle? For LCT purposes, a commercial vehicle is: n designed for the principle purpose of carrying goods used for business or trade, and n not subject to LCT. These vehicles include: n trucks n hearses, and n some vans. Vehicles designed mainly for carrying passengers (including paying passengers), or for sport or recreation purposes, are not commercial vehicles and you may have to pay LCT on them. These vehicles include: n station wagons 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

8 01 Getting started Vehicles that carry both passengers and goods Some vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and goods (that is a dual purpose). These vehicles include: n dual cab vehicles n crew cab vehicles, and n utility vehicles. For LCT purposes, the designed passenger carrying capacity is worked out by multiplying the designed seating capacity (including the driver s) by 68kg. This figure is used when applying the Australian Design Rules. The Vehicle Standard (Australian Design Rule Definitions and Vehicle Categories) 2005 (ADR), states that a vehicle constructed to carry both people and goods will be considered to be primarily for the carriage of goods if the number of seats multiplied by 68kg is less than 50% of the difference between the GVM and the tare mass. For more information about Australian Design Rules (ADR), visit the Department of Infrastructure and Transport website at See Definitions for GVM and tare mass on page EXAMPLE: Working out the main purpose of your vehicle Brooke supplies a dual cab vehicle to a buyer with seats for five people, including the driver. The value of the vehicle is more than the LCT threshold and the difference between the GVM and the unladen mass is 960kg. The vehicle appears to have been designed for both the carriage of persons and the carriage of goods (that is a dual purpose). Brooke then looks at the passenger carrying capacity of the vehicle, which she works out as follows: 5 passengers 68kg = 340kg She then finds out if the passenger carrying capacity (340kg) is less than 50% of the difference between the GVM and the unladen mass (960kg). 50% 960kg = 480kg 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 is to carry goods. 6 Luxury car tax

9 LCT payable on supplying 02 a luxury car You must pay LCT at the time you supply a luxury car, unless the purchaser quotes their ABN to you in an approved format (see Quoting your ABN on page 11). Supplies of luxury cars The term supply generally means anything you provide, including any retail and wholesale sales you make. The following examples are all considered a supply under LCT law: n a dealer that sells a car to an individual or business and the car s title passes from the manufacturer (or importer) to a finance company, then to a dealership, then to the end customer each stage is regarded as a separate supply. n a dealer, wholesaler, manufacturer or importer that provides a luxury car to an employee, either as a bonus or as part of a salary package n the sale of a car to a Commonwealth, state or territory department, agency or statutory authority n the sale or trade-in of a car that is a capital asset of a business. When does LCT apply to a supply of a luxury car? The supply of a luxury car is subject to LCT if all of the following apply: n you make the supply in the course of your enterprise n you make the supply in connection with Australia, and n you are registered or required to be registered for GST. When does LCT not apply to a supply of a luxury car? The supply of a luxury car is not subject to LCT if any of the following apply: n the person receiving the car quotes their ABN in the prescribed format (see Quoting your ABN on page 11) n the car is more than two years old that is, it was manufactured in Australia more than two years before the supply, or it was imported and entered for home consumption more than two years before the supply, or n the car is exported as a GST-free export. If the car has been restored or converted into a limousine, the two-year period starts from when the original car was first manufactured in Australia or entered for home consumption. If you sell the restored or converted car for an amount above the LCT threshold within the two-year period, LCT will apply unless the buyer quotes their ABN. How to work out LCT You only apply LCT to the value of the vehicle above the LCT threshold, less GST. Use the following formula to work out LCT: (LCT value LCT threshold) The LCT value is the price of the car, less any: n LCT included in the supply, and n any other Australian tax, fee or charge, other than GST and customs duty. The price of the car should include all of the following: n GST and any customs duty n dealer delivery charges, and n standard and statutory warranties. Generally it does not include any other Australian tax, fee or charges (for example, stamp duty, transfer fees, registration, compulsory third-party insurance, extended warranties and costs associated with financing the purchase of the car). If LCT has already been paid on the car, you can reduce the amount you must pay by the amount of LCT already paid (see Cars that have already been subject to LCT on page 8). EXAMPLE: Working out the LCT you must report and pay Chen sells a non fuel-efficient car worth $88,000 including GST. The value of the car is more than the LCT threshold ($57,466 for the financial year) so he must pay LCT to us on the sale of the car. To work out the amount of LCT he must pay, Chen completes the following steps: 1 He works out the total value of the luxury car that is above the LCT threshold: Total luxury car value (including GST) LCT threshold $88,000 $57,466 = $30,534 2 He then excludes the GST included in the amount above the LCT threshold: 10 = $30, = $27, He then works out LCT (33% of the amount above the LCT threshold less GST): 33 = $27, = $9,160` 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

10 02 LCT payable on supplying a luxury car EXAMPLE: Working out the LCT and GST when a luxury car has an all up price Kyle s Motors (KM) sells a luxury car (which is not a fuel-efficient car) to Bruce, for an all-up price of $95,017, including GST (10%) and LCT (33%). This price does not include; stamp duty, registration or compulsory third party insurance. To work out the LCT it must pay, KM completes the following step: 1 KM takes out the GST and LCT payable (43% in all) from the amount above the LCT threshold: ( all-up price LCT threshold) 1.43 ($95,017 $57,466) 1.43 = $26, KM then multiplies this by the LCT rate of 33% to get the LCT payable: 33 $26, = $8, KM then calculates the GST included in the all-up price. First work out the LCT value: all-up price LCT payable on the sale = LCT value $95,017 $8, = $86, The GST payable will be one-eleventh of this amount: 1 = $86, = $7, So the all-up price of $95,017 paid by Bruce includes $8, LCT and $7, GST. For step-by-step instructions about calculating LCT, refer to Luxury car tax how to complete your activity statement (NAT 7391). Example: Working out LCT on a fuel-efficient car below the threshold Sanjee supplies a fuel-efficient car for $69,000 in July As the price is less than the fuel-efficient car limit of $75,375 LCT does not apply. Example: Working out the LCT on a fuel-efficient car above the threshold Caroline supplies an imported fuel-efficient car for $90,000 in January As the price is more than the fuel-efficient car limit of $75,375 she will need to work out the LCT she is liable to pay. She does this by completing the following steps: 1 She works out the price of the car above the fuel-efficient car threshold: Total luxury car value (including GST) fuel-efficient car threshold: $90,000 $75,375 = $14,625 2 She then excludes the GST from this amount: $14, = $13, She then multiplies this amount by 33% to work out the LCT she must pay: $13, = $4,387 4 She then adds this amount to the GST-inclusive price of the car to work out the total cost: $90,000 + $4,387 = $94,387 Cars that have already been subject to LCT You can pay less LCT if you supply a luxury car which is less than two years old and on which an amount of LCT has already been paid. The LCT you must pay on this latest supply of the 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. You must take into account any previous LCT adjustments when working out this reduction, except bad debts (see 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 the car has already been subject to LCT, you will only have to 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. If the LCT you must pay on this latest supply is less than the sum of all LCT previously paid (or due to be paid), the amount of LCT on the latest supply is zero. In these situations you cannot claim a refund. 8 Luxury car tax

11 02 LCT payable on supplying a luxury car You must have evidence that LCT was previously paid (or was due to be paid) on the car including: n documents showing your supplier made a taxable sale of a luxury car because you did not quote your ABN n invoices or documents relating to a previous taxable sale or importation n a written statement from a previous owner or supplier stating the amount of LCT that was previously paid or due to be paid. EXAMPLE: Working out the LCT and GST payable when a non fuel-efficient car has been sold for an all-up price and some LCT has already been paid Ben pays ABC car dealership an all-up price of $95,017 for a second hand car on which LCT of $6, has previously been paid. The car is less than two years old and Ben does not quote his ABN. To work out the amount of LCT and GST payable to the ATO, ABC completes the following steps: 1 ABC takes out the GST and LCT payable (33% in all) from the amount above the LCT threshold: ( all-up price LCT threshold) 1.43 ($95,017 $57,466) 1.43 = $26, ABC then multiplies this by the LCT rate of 33% to get the LCT payable: $26, = $8, ABC then excludes the LCT of $6, which was paid by the previous owner: $8, $6, = $2, 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, = $92, The GST payable will be one-eleventh of this amount: = $92, = $8, So the all-up price of $95,017 Ben paid includes $2, LCT and $8, GST. Other situations Supply of a car to an associate If you supply or give a luxury car to your employee, associate or an employee of your associate for less than the car s market value, the LCT value of the car will be its GST-inclusive market value excluding any LCT payable. If the car is a fuel-efficient car under $75,375 then LCT will not apply to the supply. If the car is a fuel-efficient car over $75,375 then the LCT value of the car will be its GST-inclusive market value excluding any LCT payable. Additional accessories, modifications and treatments The LCT value of a car includes the price of all accessories, modifications and treatments made to the car or paid for by the customer (or their associate), provided they are made: n before the car is delivered to the customer, or n under an arrangement with the supplier of the car, or with an associate of the supplier, at or before the time of delivery. Providing cars between members of GST groups and participants in GST joint ventures LCT is payable if a luxury car is provided by one GST group member to another or by one GST joint venture participant to another unless the recipient quotes their ABN. This applies if the provision occurs within two years from the date of manufacture in Australia or, if imported, the date of entry for home consumption. Luxury car tax 9

12 03 Importing luxury cars When are luxury car imports subject to LCT? If you import a luxury car into Australia, the car will be subject to LCT if both of the following apply: n you do not quote your ABN (see Quoting your ABN on page 11), and n you enter the car for home consumption (see Enter for home consumption on page 19). You can make a taxable importation even if you are not registered for GST or carrying on an enterprise. An imported car includes any car parts, accessories or attachments you import at the same time that could reasonably be expected to be fitted to the car. If the luxury car was restored overseas using parts that were purchased and exported from Australia, you must pay LCT unless you are entitled to quote an ABN. When are luxury car imports not subject to LCT? You do not have to pay LCT on an importation of a luxury car if any of the following apply: n you quote your ABN for the importation of the car (see Quoting your ABN on page 11). n LCT has already been paid on the car (for example, you export a luxury car from Australia, having already paid LCT on the vehicle, it is later returned to Australia in an unaltered condition) n the car is covered by items in Schedule 4 to the Customs Tariff (see What is schedule 4 to the Customs Tariff? below), or n the importation of the car is a non-taxable re-importation. What is Schedule 4 to the Customs Tariff? Under Schedule 4 to the Customs Tariff, a car is not subject to LCT at the time it is imported if it is covered by the following items. Item number: 18A 18B 18C Deals with: Previously imported goods that are returned after repair overseas under warranty provisions Goods supplied free of charge to replace goods or parts under warranty 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. What is a non-taxable re-importation An importation is a non-taxable re-importation if the following apply: n the car was previously exported and is now being returned to Australia in an unaltered condition, and n the importer either manufactured the vehicle, or previously purchased or imported the car and LCT was paid at that time. When must LCT be paid on an importation? If you import a luxury car, you are liable to pay the LCT to Australian Customs and Border Protection Service at the same time you are liable to pay the customs duty, unless one of the following applies: n you quote your ABN (see Quoting your ABN on page 11) 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 or undertaking to Customs, for example, if the importation is only temporary, such as when a luxury car is brought into Australia for a rally event with the intention of taking it out again. How to work out the LCT payable on an importation LCT on the importation of a luxury car is: (LCT value LCT threshold) The LCT value of an importation includes all of the following: n the customs value (as worked out under the Customs Act) of the car and of any parts, accessories or attachments that are imported at the same time as the car and that can reasonably be expected to be fitted to the car (add-ons) n amounts not already included in the customs value for the transport of the car and add-ons to Australia n the amount not already included in the customs value for the insurance of the car and add-ons to be transported to Australia n any customs duty payable on the importation of the car and add-ons n any GST payable on the importation of the car and add-ons, or n if the importation of the car is GST-free, an amount equal to the amount of GST that would otherwise have been payable. 10 Luxury car tax

13 Quoting your ABN 04 In some circumstances you can quote your ABN (using an approved format) at the time you purchase or import a luxury car. By doing this, you can defer payment of LCT until the car is sold or imported at the retail level. Who can quote? You can quote your ABN to defer paying LCT when you purchase or import a luxury car if all of the following apply: n you are registered for GST n you have an ABN, and n you intend to use the car for one of the following purposes only holding the car for trading stock, other than holding it for hire or lease carrying out research and development for the manufacturer of the car exporting the car where the export is GST-free under GST law. If you are a retail car dealer and you purchase a car to use only as a demonstrator vehicle for potential customers to see or test drive, you are holding the car as trading stock and can quote on the purchase of the car. If you are a business and import a luxury car with the intention of restoring and selling it, you are holding it as trading stock. Provided you do not intend to use the car for any other purpose, you are entitled to quote. You are considered holding a car for purposes other than trading stock and will not be entitled to quote for it if you intend to use the luxury car for any of the following reasons: n for personal use n for rally or race driving n for staff salary packaging n for promotion or sponsorship purposes n as an executive vehicle, or n as a capital asset. This applies even if you intend to sell the car at a later date. If you have quoted your ABN and then use the luxury car for a non-quotable purpose, you must pay the LCT (see Increasing change of use adjustment on page 13). If you are not registered for GST, you cannot quote your ABN in order to defer paying LCT on a luxury car. When to quote You must quote your ABN at or before the time of your purchase or importation of the luxury car. You cannot quote after buying the luxury car. If you are charged LCT on a luxury car for which you were entitled to quote your ABN, you can claim an LCT adjustment on your activity statement, provided you are registered for LCT as well as GST (see Accounting for LCT on page 5). How to quote Your quote must be made in the following format: Prescribed format for making a quotation I hereby quote Australian business number in relation to the supply of the luxury car as detailed above/attached. Name of business: Name of person authorised to quote: Signature of person authorised to quote: Date: The quotation must be on, or attached to one of the following: n the order for the luxury car, or n any other document provided to the supplier or Customs that clearly identifies the car, for example a contract, import warrant or letter. It is up to you to have the quote in the approved format, printed on the relevant documentation or have the forms printed to meet your requirements. If the order or document the quote relates to has more than one car on it, you must clearly identify the luxury cars the quote relates to. Quotes to cover several purchases over time (periodic quotation) If you purchase several luxury cars in Australia over a period of time, you can give your supplier a single quote to cover all your purchases for a period of 12 months or less. This is called a periodic quotation of an ABN. You cannot use a periodic quotation when importing luxury cars. The periodic quotation must be in the following format: Periodic quotation format I hereby quote Australian business number in relation to the supply of all luxury cars obtained by me during the period to inclusive, except luxury cars about which I notify you to the contrary at or before the time of their supply. Name of business: Name of person authorised to quote: Signature of person authorised to quote: Date: Luxury car tax 11

14 04 Quoting your ABN You do not need an approval from us to use a periodic quotation and any luxury car supplier can accept one for cars purchased in Australia. You must be able to clearly identify each luxury car you purchased during the quotation period. If you plan to purchase more luxury cars after the end of your specified quotation period, you will need to give your supplier a new periodic quotation. Non-quotable purchases and periodic quotations During a period covered by a periodic quotation, you may need to buy a luxury car for a non-quotable purpose. You must tell your supplier that the luxury car is to be used for a non-quotable purpose before you purchase it. The notification must be in the following format: Non-quotable purchases format I hereby notify you that I am not quoting for the supply of the following luxury car(s): Description of car(s): Date of transaction: Australian business number: Name of business: Name of person authorised to make this declaration: Signature: Date: If you do not tell the supplier that a car is to be used for a non-quotable purpose and obtain the car free of LCT, you must account for it in your activity statement as an increasing change of use adjustment (see page 13). Quoting on luxury cars you import If you enter a luxury car for home consumption, you must do one of the following: n complete the approved Customs entry forms, including the sections about quotation of an ABN, or n provide Customs with a quotation in the following format: Customs quotation format Quotation under A New Tax System (Luxury Car Tax) Act 1999 I hereby quote my Australian business number: in relation to the importations described on the entry lines where I have indicated my intention to quote. You or your Customs agent must specify in writing (in the field provided on the Customs forms) the specific luxury car or cars that are being quoted for. The ABN must be entered in the field provided on the Customs forms. You can authorise a Customs agent to quote your ABN on your behalf, but you must do this in writing and you must make sure that the agent quotes correctly under the LCT and Customs law. Who can sign a quote The person who can sign a quote depends on the type of entity they are quoting for, as outlined in the following table: Entity Individual Partnership Trust Company Who can sign That individual Any one of the partners resident in Australia Any one of the trustees resident in Australia, or if none is resident, their agent in Australia 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

15 Adjustments to LCT 05 What is an LCT adjustment? After you supply or import a luxury car, changes can sometimes occur that alter the amount of LCT you paid, or were liable to pay, in a previous tax period or after you purchase a luxury car. An LCT adjustment can arise because of one of the following: n an adjustment event n a change of use of the car n a bad debt being written off or a debt being overdue for 12 months or more. If a change like this occurs, you will need to make an adjustment on your activity statement for the period when either: n the change happens, or n you find out about the change. This adjustment will increase or decrease the net amount of tax you are liable to pay to us. Adjustments can be made by the supplier, a registered recipient or a registered importer. An adjustment event LCT adjustment events include: n the cancellation of the sale of the vehicle (for example, where 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 of a vehicle (for example, where you offer a purchaser a decrease through a volume discount, and the LCT on the original price was accounted for in an earlier tax period. You will need to calculate the LCT on the new price and the difference between the new LCT and the tax that has already been paid is the amount of the adjustment), or n causing a sale of a luxury car to become, or stop being, a taxable supply. Change of use adjustments Change of use adjustments occur where either you: n have quoted your ABN on a purchase or importation of a luxury car, but you then use the car for a non-quotable purpose, or n did not quote your ABN on a purchase or importation of a luxury car but should have because you intended to use, and have only used, the car for a quotable purpose. For more information on quotable purposes, see Who can quote? on page 11. Decreasing change of use adjustment You have a decreasing LCT adjustment for change of use if all of the following apply: n you purchased or imported a luxury car n LCT was payable because you did not quote your ABN n you were registered for GST at the time of supply or importation, and n you have used, and intend to use, the car only for a quotable purpose. The decreasing LCT adjustment is equal to the amount of LCT that was payable on the supply or importation of the car. Example: Decreasing change of use adjustment Ranjan, a car dealer, did not quote when purchasing a luxury car because the car was going to be used by the executives of the dealership. As such, Ranjan paid LCT at the time of the purchase. However, when the car was delivered, Ranjan ended up holding it solely for trading stock and it was not used by the dealership executives. Ranjan can claim a decreasing LCT adjustment equal to the amount of tax that was payable on his purchase of the car. Increasing change of use adjustment You have an increasing LCT adjustment for change of use if either of the following apply: n no LCT was payable because you quoted an ABN, or n you had a decreasing LCT adjustment because of a change of use, but you then used the car for a purpose other than a quotable purpose. The increasing LCT adjustment will be equal to either: n the LCT that would have been payable on the supply or importation if you had not quoted, or n the previous decreasing LCT adjustment. Example: Increasing change of use adjustment Monique, a car dealer purchased 10 luxury cars to be held solely as trading stock and quoted her ABN to the manufacturer. As such, she did not pay LCT. Monique later uses one of the cars as an executive vehicle, so the car is used for a purpose other than a quotable purpose. 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

16 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

17 Credits 06 Who can claim a credit for LCT Credits for LCT can only be claimed if you are not registered for GST and are therefore not entitled to an adjustment. You may claim a credit for LCT you have paid, or that has been paid by the supplier of the luxury car if all of the following apply: n you have a credit entitlement n you are not registered, or required to be registered, for GST, and n no-one else has made a valid claim for a credit in relation to the credit entitlement. You have a credit entitlement if you have either: 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, but you were unable to quote because you were unregistered (for example, an unregistered company purchasing a luxury car to conduct research and development for the manufacturer of the car), or n exported a luxury car which is a GST-free export. REFUNDS FOR PRIMARY PRODUCERS AND TOURISM OPERATORS Special refunds may be available for some primary producers and tourism operators when buying luxury cars. Most primary producers and tourism operators can claim refunds of 8 33 of the LCT they have paid, up to a maximum of $3, is the difference between the current LCT rate of 33% and the previous LCT rate of 25%. Primary producers can claim a refund of up to $3,000 for only one eligible car purchased or leased in a financial year. Tourism operators can claim a refund of up to $3,000 for each eligible car purchased or leased in a financial year. For more information on the refunds available for primary producers and tourism operators, see: n GST and LCT on cars for primary producers and tourism operators (NAT 72601) n Application for luxury car tax refund primary producers 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 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

18 07 Cars purchased for people with disabilities LCT on cars used for transporting people with a disability A car that is specially fitted out for transporting a disabled person seated in a wheelchair is not considered a luxury car and is not subject to LCT, provided the car is not GST-free. If the car is GST-free, it will be subject to LCT. A car is GST-free up to the car limit if the supply is made to: n a disabled veteran who intends to use the car for their personal transportation for a specified period, or n a person who has a current disability certificate who intends to use the car for transport to or from gainful employment for a specified period. The specified period starts when a person purchases a car and ends at the earliest of one of the following: n two years after the purchase n the time when the car is no longer reasonably capable of being used for the purpose for which cars of that kind are ordinarily used, or n a time that the we consider to be appropriate in special circumstances. The appropriate time is the period from the date of supply, which is usually the date of delivery to the customer, until the car has been used by the eligible person with a disability to travel 40,000km. 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. LCT on cars purchased by people with a disability LCT will apply to a car purchased by a person with a disability if the value of the car is greater than the LCT threshold, even if the car is GST-free. LCT is not payable on modifications made to a car that are made solely for the purpose of either: n adapting it to be driven by a person with a disability, or n transporting a person with a disability. When the LCT value of a car purchased by a person with a disability is worked out, the value does not include the value of these modifications. When the supply of a luxury car is GST-free up to the car limit, LCT is calculated as though GST had been payable. When you work out the LCT value, you must include an amount equal to the amount of GST that would otherwise have been payable. This is called the notional GST. For more information on how GST and LCT applies to cars purchased by people with a disability, refer to GST and LCT on cars you buy a guide for people with disabilities (NAT 4325). 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

19 07 Cars purchased for people with disabilities Example: Working out the LCT and GST payable when the sale of the car is partly GST-free Mary has a current disability certificate and wants to buy a new luxury car for travel to and from paid work for at least the next two years. The car is valued at $80,000 without GST or LCT. The sale of the car to Mary is GST-free (on the value up to the car limit). The value above the car limit is subject to GST and LCT. 1 Calculate the LCT value: Value of the car + (notional) GST = $80,000 + ( 1 10 $80,000) = $80,000 + $8,000 = $88,000 2 Calculate the amount that is above the LCT threshold: LCT value LCT threshold $88,000 $57,466 = $30,534 3 Exclude the GST included in the amount above the LCT threshold: $30, = $27, Calculate the GST payable by multiplying $27, by 10%: $27, = $2, Calculate 33% of the amount above the LCT threshold less GST: $27, = $9, Therefore the GST payable on the value of the car above the car limit is $2, and the LCT is $9, Calculate the total amount Mary needs to pay: Value of the car + GST + LCT $80,000 + $2, $9, = $91, Example: Working out the total price of a car when the sale of both the car and the modifications are GST-free Matthew has a current disability certificate and wants to buy a new car for travel to and from paid work for at least the next two years. The normal purchase price of the car including GST is $55,000 (the GST-inclusive market value), which is under the LCT threshold of $57,466 for the financial year. Matthew asks the dealer to modify the car by adding hand controls so that he can drive it. These modifications add $25,000 (exclusive of GST) to the purchase price of the car. The sale of the car, with modifications, to Matthew is GST-free and LCT free. In working out the GST and LCT value of the car, you do not include the price of modifications made solely to enable the car to be driven by a person with a disability, or to transport a person with a disability. Matthew will have to pay the GST-exclusive price of the car plus the price of the modifications: = $50,000 (GST-exclusive price) + $25,000 (the price of the modifications excluding GST and LCT) = $75,000 Luxury car tax 17

20 08 Emergency vehicles For LCT purposes, the following vehicles are considered emergency vehicles: n a vehicle that is registered in a state or territory as an emergency vehicle n an ambulance n a mobile intensive care ambulance (MICA) or similar vehicle that is: fitted with a siren and flashing warning lights, and used to transport paramedics and equipment to the site of an accident n a fire fighting vehicle that: is designed, permanently fitted out and equipped for the purpose of fighting and preventing fires, and has external markings that identify it as a fire fighting vehicle n a police vehicle that is equipped with a siren and flashing warning lights n an emergency response or search and rescue vehicle that: is designed and permanently fitted out for the purpose of emergency response or search and rescue operations, and has external markings that identify it as a vehicle of that kind n a vehicle that: is designed and permanently fitted out for the purpose of responding to and dealing with an environmental emergency, and has external markings that identify it as a vehicle of that kind 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. Certification for emergency vehicles If you supply an emergency vehicle, you must get a statement from the purchaser certifying that the vehicle will only be used as an emergency vehicle. This statement must be made in the following format: Emergency vehicles format A New Tax System (Luxury Car Tax) Regulations 2000 Certification to the Commissioner of Taxation Acquisition of emergency vehicle I hereby certify that this vehicle is a prescribed emergency vehicle used for emergency purposes and is not subject to luxury car tax. Description of vehicle: Emergency purpose of vehicle: Date of acquisition: Name of authorised person making this statement: Name of entity or organisation: Signature: Date: 18 Luxury car tax

21 Definitions Associates Associates include people and entities closely associated with you, such as: n relatives, or n closely connected companies or trusts. A partner in a partnership is an associate of the partnership. Australian business number (ABN) An ABN is your identifier for your dealings with the us and for future dealings with other government departments and agencies. This is in addition to and is different to your tax file number. Business (enterprise) An enterprise includes a business. It also includes other commercial activities but does not include: n private recreational pursuits or hobbies n activities carried on as an employee, labour hire worker, director or office holder, or n activities carried on by individuals (other than trustees of charitable funds) or partnerships (in which all or most of the partners are individuals) without a reasonable expectation of profit. It includes the activities of entities such as charities, deductible gift recipients, religious and government organisations and certain non profit organisations. Car LCT legislation defines car as a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than two tonnes and less than nine passengers. It includes: n passenger cars n station wagons n four-wheel drive vehicles, and n limousines. It does not include: n trucks and vans designed to carry a load of more than two tonnes n buses designed to carry nine or more passengers, or n racing and rally cars that are not used as road vehicles and cannot be registered for use on public roads in any country in the world. Car limit The car limit is an amount determined by tax law for the relevant financial year. It is used to calculate depreciation deductions under the income tax law. Connected with Australia A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the sale. A supply of a service is typically done where the service is 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. For more information, refer to GSTR 2000/31 Goods and services tax: supplies connected with Australia. Consideration (See Payment on page 20) Demonstrator vehicle A demonstrator vehicle is a designated car that is held by a retail car dealer at their premises and used to demonstrate a particular make and model of car that is part of the trading stock that they sell to retail customers. Enter for home consumption Generally, GST and LCT must be paid by the importer at the same time and in the same way as customs duty. This is collected by Australian Customs and Border Protection Service at the time the goods are entered for home consumption. That is, when an import declaration is communicated to the Australian Customs and Border Protection Service for goods that have been imported and have arrived at a port or airport in Australia. Enterprise (see Business above) Entity An entity can be any of the following: n an individual (for example a sole trader) n a body corporate n a corporate sole (an ongoing paid office, for example, a bishopric) n a body politic n a partnership n an unincorporated association or body of persons n a company n a trust, or n a superannuation fund. Fuel-efficient cars A fuel-efficient car has a fuel consumption that does not exceed seven litres per 100 km. This is as a combined rating under the vehicle standards in force under section 7 of the Motor Vehicle Standards Act The fuel-efficient car limit for the financial year is $75,375. GST-inclusive market value GST-inclusive market value means the market value of the sale or purchase without any discount for the amount of GST (if any) payable on the sale. Gross vehicle mass (GVM) The maximum laden mass of a motor vehicle as specified by the manufacturer and stated in the vehicle s brochure. Luxury car tax 19

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