Private ruling: LCT and modified motor vehicle
Published: May 2012

Ruling: Q1: Is the modified vehicle a commercial vehicle for the purpose of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act)? Is luxury car tax payable at any time between the purchase of the original vehicle and the sale of the modified vehicle? | A1: Yes, the modified motor vehicle is a commercial vehicle for the purpose of the LCT Act. No, luxury car tax is not payable at any time between the purchase of the original vehicle and the sale of the modified motor vehicle. Relevant facts and circumstances You are registered for goods and services tax (GST). You are carrying on a specialist automotive conversions business. You hold a federal licence for second stage manufacturing. You purchase a standard a car and modify it by extending the wheelbase and increasing the carrying load. The modified vehicle is classified under the Australian Design Rules (ADR) as an NB1 commercial goods-carrying vehicle and has a tare mass of 2,800 kg and gross vehicle mass (GVM) of 3,800 kg. It still has seats for five passengers. You hold the modified vehicle as trading stock. You promote and market the modified vehicle as goods-carrying dual cab utility vehicle with one tonne carrying capacity. The base price for the modified vehicle is above the luxury car tax threshold. When you purchase the original vehicle, you quote your Australian business number (ABN) in the prescribed format on the basis that you will hold the vehicle as trading stock. As such, luxury car tax is not paid on the supply of the original car to you.


Relevant legislative provisions: A New Tax System (Luxury Car Tax) Act 1999 section 5-5, | A New Tax System (Luxury Car Tax) Act 1999 section 5-10, | A New Tax System (Luxury Car Tax) Act 1999 section 9-5, | A New Tax System (Luxury Car Tax) Act 1999 section 25-1 and | A New Tax System (Luxury Car Tax) Act 1999 section 27-1.

Reasons for decision: Summary: For LCT purposes, a commercial vehicle is designed for the principal purpose of carrying goods for business or trade. Vehicles designed mainly for carrying passengers, or for sport or recreation purposes, are not commercial vehicles. To work out the main purpose for which a vehicle has been designed, the following things are considered: · its appearance and presentation · relevant promotional material and how it is marketed · its specifications · the load carrying capacity, and · the number of passengers it can carry. For LCT purposes, the designed passenger carrying capacity is worked out by multiplying the designed seating capacity by 68kg. A vehicle constructed to carry both people and goods will be considered to be primarily for the carriage of goods if the passenger carrying capacity is less than 50% of the difference between the GVM and the tare mass. The modified vehicle has 5 passenger seats. Its GVM is 3,800 kg and its tare mass is 2,800 kg. By calculation, its passenger carrying capacity is less than 50% of the difference between its GVM and tare mass. As such, the modified vehicle is primarily for the carriage of goods. Based on the information provided, the appearance and presentation of the modified vehicle indicates that is designed for the purpose of carrying goods for business or trade. You advised that the modified vehicle is marketed as a dual cab utility vehicle for carrying goods. Furthermore, the modified vehicle is classified as such by relevant authorities. Therefore, the modified vehicle is a commercial vehicle for the purpose of the LCT Act. Luxury car tax is payable on any taxable supply of a luxury car. Subsection 5-10(1) of the LCT Act states: You make a taxable supply of a luxury car if: (a) you supply a *luxury car; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) you are *registered, or *required to be registered. (*denotes a term defined in section 27-1 of the LCT Act). According to subsection 5-10(2) of the LCT Act, a supply is not a taxable supply of a luxury car if: (a) the recipient quotes for the supply of the car; or (b) the car is more than 2 years old; or (c) the car is exported in circumstances where the export is GST-free under Subdivision 38-E of the GST Act. Purchase of the original vehicle You advised that when you purchase the original vehicle, you quote your ABN. As such, the supply of the original vehicle to you is not a taxable supply of a luxury car in accordance with paragraph 5-10(2)(a) of the LCT Act. Therefore, there is no luxury car tax payable on the supply of the original vehicle. Sale of the modified vehicle Subsection 25-1(1) of the LCT Act defines a luxury car as a car whose luxury car tax value exceeds the luxury car threshold. However, according to paragraph 25-1(2)(c) of the LCT Act, a commercial vehicle that is not designed for the principal purpose of carrying passengers is not a luxury car. As discussed in the answer to question 1, the modified vehicle is a commercial vehicle that is designed for the principal purpose of carrying goods. The modified vehicle is not a luxury car for the purpose of the LCT Act. Therefore, there is no LCT payable on the sale of the modified vehicle.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.