motor Archives - dmca advisory

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/

Changes to motor vehicle & home office deductions for 2018/19

Motor vehicle tax deductions are on the up this year.

Those looking to claim motor vehicle expenses in the 2018/19 financial year should be aware the rate for work-related expenses is now 68 cents per kilometre.

This applies to eligible taxpayers who elect to use the cents per kilometre method when calculating income tax deductions for work-related car expenses.

You can claim up to 5,000 business-related kilometres without needing supporting evidence, but you could be asked to show how you worked out your rate. Simply calculate your total business kilometres for the year (up to a maximum of 5,000km) and multiply that figure by 68 cents. This calculation will also take into account all running expenses for the car.

Home office tax deductions are on the up this year.

Home office running expenses have also been given a boost this year with the hourly rate increased from 45 cents per hour to 52 cents per hour for the 2018/19 financial year. Using the rate per hour method includes all running expenses for the home office, including things like electricity and air conditioning, and takes into account depreciation of any home office furniture. Taxpayers using this method must keep a record of hours worked from home, either as an annual figure, or as a four-week log book if hours are regular. If you run a home office, talk to your adviser at dmca about what expenses you might be able to claim for this activity.