Luxury Car Tax (LCT)

There are 2 different types of Luxury Car Tax.
There is LCT that is paid by businesses that sell or import luxury cars (dealers), and also by individuals who buy luxury cars.
There is also LCT for depreciation.

LCT for Importers and Exporters

Luxury Car Tax (LCT) is a tax on cars with a GST-inclusive value above the LCT threshold.

LCT is imposed at the rate of 33% on the amount above the luxury car threshold and applies to sales of cars that are two years old or less. A car is more than two years old at the time of supply if it was manufactured locally or imported more than two years previously.

For LCT purposes, a car is a motor vehicle (but not a motorcycle) designed to carry a load of less than two tonnes and fewer than nine passengers. A limousine is classified as a car, regardless of the number of passengers it’s designed to carry.

LCT for Depreciation

If you use a motor vehicle solely for business purposes and you’re registered for GST, you’re generally entitled to claim a GST credit for the GST included in the price of the vehicle, provided you have a tax invoice.

If you use a motor vehicle partly for business purposes, you’re generally entitled to claim a partial GST credit based on how much you use the motor vehicle for business purposes.

If the purchase price is under the LCT limit then the car can be full depreciated and you can claim GST on the entire purchase. The GST inclusive limit for depreciation and GST is $57,581.

If you purchase a car and the price is more than the LCT car limit, the maximum amount of GST credit you can claim is one-eleventh of that limit. For 2017-18, the maximum GST credit you can claim is $5,234 (that is, 1/11 x $57,581).

If you purchase a car with a price that is more than the car limit, you include only depreciation up to the limit. The remaining amount of the purchase is not deductible or depreciable.

Example of Depreciation

Bob purchases a new car for $68,043 inc GST on 12 July 2017. Bob plans to use the car 100% in carrying on his business. The car limit for the 2017–18 financial year is $57,581.

The maximum depreciable amount credit Bob can claim is $57,581 and the maximum GST credit Bob can claim is $5,234. The remaining amount from the $68,043, which is $5,228, is not depreciable or deductible and must remain as an asset on your balance sheet until you sell the car.


Sheridan Wilson