Luxury cars, threshold amount increases for 2020/21

Background to luxury car tax (LCT)

The luxury car tax (LCT for short) is a tax paid on cars above a certain value (GST-inclusive). The tax rate is calculated at 33%. Usually, it is paid by car dealers who sell or import luxury cars, with the LCT added to the purchase price. It is one of the reasons some European cars can seem more expensive here compared to other countries.

The luxury car tax was first introduced by the Government in 2000 alongside the Goods and Services Tax (GST).

Each year the thresholds at which the LCT is charged changes. The threshold is higher for vehicles considered fuel-efficient to encourage people to buy more environmentally-friendly cars. The tax also includes the value of any parts, accessories or attachments supplied.

LCT rates for 2020/21

Next financial year the luxury car tax threshold (that is, the price at which the LCT needs to be added to the cost of a car) increases slightly from $67,525 in 2019/20, to $68,740 for 2020/21. The tax applies to cars that are two years old or less, and is calculated for the year they were sold. (At the dealer, the LCT is added to the car’s retail value and on top of the GST.)

For more information on luxury car tax and thresholds for each year, go the ATO website here: https://www.ato.gov.au/Rates/Luxury-car-tax-rate-and-thresholds/

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