The Luxury Car Tax (LCT) is a tax imposed on cars that have a value that includes the GST above the LCT threshold. It is a fee that applies to new cars (those less than two years old) sold at a price that exceeds a value threshold set by the Australian Tax Office (ATO). Cars with a luxury car tax (LCT) value above the LCT threshold attract a 33% LCT rate. The luxury car tax threshold is indexed on July 1 of each year and is based on any increase in the motor vehicle purchase subgroup of the Consumer Price Index (CPI).The Federal Chamber of Automotive Industries (FCAI) has called for the abolition of the tax on luxury cars and replaced by a charge for road users.
The LCT was implemented as a means to deter and limit Australians from buying prestigious and exotic imported cars, encouraging them instead to buy Australian-made cars from Holden, Ford and Toyota (where such cars existed). The LCT expires and is paid when you sell the luxury car or stop using it for a quotable purpose. The luxury car tax was introduced along with the goods and services tax (GST) in 2000, designed to cover the deficit after the wholesale tax, which imposed levies of up to 45 percent on imported vehicles, was eliminated. The Luxury Car Tax (LCT) is collected by the Australian Tax Office on behalf of the Australian Government.
Most cars in Australia are imported from abroad, which may make LCT unavoidable when buying a new luxury vehicle. The ATO states that the luxury car tax only applies to eligible vehicles under two years of age, starting from the date they were imported into Australia or manufactured here. In general, the value of a car includes the value of any part, accessory, or accessory that you have supplied, or imported, at the same time as the car. Indonesia, which generally adds a 10 to 30 percent tax on luxury cars, will eliminate that tax from March to May of this year on sedans and two-wheel-drive cars with engine power under 1,500 cc, to help its struggling automotive industry.The tax structure mentioned above applies to all luxury cars imported across the country, but there may also be an additional tax depending on the state in which you live.
Prior to this, Australia had a long history of taxing expensive cars, dating back to the Wholesale Sales Tax (WST), a precursor to GST, which saw luxury cars taxed at a higher rate than non-luxury cars.