The amount of money you spend on a car is very much a personal preference. For some people a car gets them from A to B, for others it’s a statement of their personality. If you’re the type of person that likes a bit of luxury from the car you drive…..did you know the government charges you a 33% tax for the privilege?
A luxury car tax applies to vehicles that are new or demonstrators (less than 2 years old) that are worth more than $60,316 or $75,375 (depending on their fuel consumption). The luxury car tax (LCT) is included in the price you pay at the dealer. Your drive away price includes a 33% tax on the cost of the car above the LCT limit.
There’s only one way to limit the amount of LCT you pay on your new car and that’s to purchase a fuel efficient car that uses less than 7 litres per 100km. The government has given taxpayers an incentive to purchase these types of cars by increasing the LCT limit to $75,375. This means that if your new car costs $75,000 and it’s fuel economy is less than 7 litres per 100km then you won’t pay any LCT on your drive away price.
In addition to the above, if you use your car for work or business and are able to claim depreciation on your new car, you are only able to claim depreciation on the amount of $57,466. This is regardless of how much over $57,466 you paid for your new car. There’s also limits on the amount of GST you are able to claim back from the ATO (assuming you are GST registered).
So while buying a new car can be an exciting time, there are also other issues you may like to consider.
Kim Jay CA – Director