Are you planning to purchase a luxury car this year? That’s great! Luxury cars can be quite the investment.
However, whether you are paying it by cash or through financing, you need to consider more than the vehicle’s sales price.
Enter The Luxury Car Tax
There is a Luxury Car Tax (LCT) imposed on all luxury vehicle purchases and you need to take it into consideration.
What is Luxury Car Tax?
LCT is a tax paid on new and used cars where the total price is more than the Luxury Car Threshold. The tax is computed against the amount that exceeds the threshold limit. The LCT Thresholds may change each financial year, which is currently set at $75,526 for fuel-efficient vehicles and $66,331 for all other vehicles. All car sales price exceeding the thresholds are subject to 33% LCT rate.
Buyers, importers, retailers, wholesalers, and manufacturers of luxury cars are all required to pay LCT. The Australian Taxation Office (ATO) collects all LCTs paid on luxury cars.
When do you pay Luxury Car Tax?
You need to pay LCT to all sales of luxury cars that are two years old or below. Those include those that are purchased by a person with disability (PWD) and public institutions like museum, gallery, and library.
LCT calculations are usually included in price quotations given by car dealerships. Depending on the type and number of luxury car purchased, a refund of up to $3,000 may be claimed by primary producers and tourism operators on LCD paid.
How do I calculate my Luxury Car Tax?
You can calculate your LCT using the following steps:
- Calculate the total purchase cost by adding the prices of the car, additional parts, accessories, and attachments given with the car; plus Goods and Services Tax (GST). Do not include other government fees and charges like registration, stamp duty, and third party insurance.
- Subtract the current LCT threshold ($75,526 or $66,331) from the total purchase price.
- Divide the resulting difference by 1.1, which will remove the GST.
- Multiply the resulting quotient by .33 (for the 33% LCT rate).
The result will be the LCT that you are required to pay. For example, you bought a fuel-efficient luxury car for a total price of $92,000. Subtracting the $75,526 threshold from $92,000 will result to $16,474. Dividing this amount by 1.1, you will get $14,976.37. This is the final taxable amount.
Multiplying $14,976.37 by .33 will give you $4,942.20 luxury car tax due.
Which cars are exempted from Luxury Car Tax?
Not all luxury car purchases are subject to LCT. Those include:
- Cars with a total purchase price below the LCT threshold
- Commercial vehicles that aren’t made primarily as passenger cars
- Transport vehicles modified to transport wheelchair passengers
Finance your Luxury Car with Aussie Car Loans
Now that you know what Luxury Car Tax is and how to compute for it, you’ll be well prepared for you vehicle purchase. To finance your luxury car purchase, Aussie Car Loans is here to help you.
We have a team of finance experts that will help find the best car loan deal for your needs.