If you buy a vehicle worth more than $65,094, expect to pay the luxury car tax (LCT). LCT applies to businesses that sell or import cars, as well as private buyers or individuals who import vehicles valued above the threshold, which is set by the Australian Tax Office (ATO) and adjusted at the start of each tax year.
The tax is applied at a rate of 33% on every dollar of the GST-inclusive sale price that is over and above the relevant threshold. That’s around $1,665 for every $5,000. If you are a small business owner, especially a tradesperson, you may be wondering why we are telling you this. You don’t drive a fancy European car, so surely it doesn’t apply to you, right? Not so fast.
While it was primarily designed to cover expensive European imports, LCT can be a trap for small business owners, especially tradies, due to the high cost of utes these days. The team at Astute Ability Finance Group have helped several tradies secure finance for a new ute and suffice to say these utes aren’t getting any cheaper. Mercedes-Benz will launch their first-ever ‘super-luxury ute’ – the Super X Class – in Australia in April. Ford, Holden, Toyota, and Volkswagen are all reportedly planning to release models that will retail for over $70,000.
There are two thresholds set at the beginning of every financial year, with all cars divided into two categories – ‘fuel-efficient vehicles’ and ‘other vehicles’. The ‘fuel-efficient’ threshold for the 2017-18 tax year is $75,526 (unchanged from 2016-17), while ‘other vehicles’ start incurring the tax at $65,094 (up from $64,132 for 2016-17). According to a definition on the ATO website, a fuel-efficient car has a fuel consumption that does not exceed seven litres per 100 kilometres. Check with your car dealer and take a minute to research the fuel efficiency of your new set of wheels before finalising your next purchase.
Astute Ability is not permitted to give specific advice on LCT, however, we strongly recommend contacting your accountant to discuss the ramifications for your business before buying any vehicle with a sale price that is over the LCT threshold.
For more information about how Astute Ability Finance can support your vehicle finance needs, TAP call us today on 1300 306 694.