Private ruling: Luxury car tax
Date of advice: 20 March 2020
Published: April 2020
Ruling period: 2019-20 income year | 2020-21 income year | 2021-22 income year | 2022-23 income year
Date scheme commenced: 1 July 2019

Ruling: Q1: Is the dual cab utility vehicle ("the modified vehicle") a commercial vehicle for the purpose of the A New Tax System (Luxury Car Tax) Act 1999 ? | A1: Yes | Q2: Is luxury car tax payable at any time between the purchase of the four-wheel drive ("the original vehicle"), modifying the vehicle, and then making the sale of the modified vehicle to a customer? | A2: No

Relevant facts and circumstances: You are registered for Goods and Services Tax (GST) and Luxury Car Tax (LCT). You carry on an automotive business whereby you sell the four-wheel drive ("the original vehicle") and also the dual cab utility vehicle ("the modified vehicle"). The original vehicle is purchased without luxury car tax (LCT) because you quote your Australian Business Number (ABN) on the basis that you hold the vehicle as trading stock. The original vehicle is modified on the request of the buyer. Modifications are completed prior to the sale of the modified vehicle to the buyer. The modifications increase the carrying load.Photos have been provided to show the appearance of the vehicle has changed from a four-wheel drive to a utility vehicle with the back of the vehicle removed and a steel tray added.The vehicle has seats for five passengers. The modifications are carried out by a third party. You advised that the modified vehicle is classified under the Australian Design Rules as an NB1 commercial goods-carrying vehicle. You hold the modified vehicle as trading stock and promote and market it as a goods-carrying dual cab utility vehicle with one tonne carrying capacity. The base price exceeds the LCT threshold.

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

Reasons for decision: Summary: In determining whether the dual cab utility vehicle ("the modified vehicle") is subject to luxury car tax (LCT), it will need to fall within the definition of a luxury car under the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act). Section 25-1 of the LCT Act provides the definition of a luxury car and states: | Detailed Reasoning - 25-1 Meaning of luxury car: 1) A luxury car is a *car whose *luxury car tax value exceeds the *luxury car tax threshold. 2) However, a *car is not a *luxury car if it is: a) a vehicle that is specified in the regulations to be an emergency vehicle, or that is in a class of vehicles that are specified in the regulations to be emergency vehicles; or b) specifically fitted out for transporting *disabled people seated in wheelchairs (unless the supply of the car is *GST-free under Subdivision 38-P of the *GST Act); or c) a commercial vehicle that is not designed for the principal purpose of carrying passengers; or d) a motor home or campervan. Item marked with an * are defined in the dictionary at section 27-1 of the LCT Act. Section 27-1 of the LCT Act defines a car is as follows: car means a *motor vehicle (except a motor cycle or similar vehicle) that is: (a) designed to carry a load of less than 2 tonnes and fewer than 9 passengers; or (b) a limousine (regardless of the number of passengers it is designed to carry) motor vehicle means a motor-powered road vehicle (including 4 wheel drive vehicles). The modified vehicle is a motor-powered road vehicle with a 5 seater capacity and has a load carrying capacity of less than 2 tonnes, and thus would fall under the definition of a car for the purposes of the LCT Act. The vehicle falls under the definition of a luxury car because its LCT value is above the LCT threshold. However, under paragraph 25-1(2)(c) of the LCT Act, a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers. For LCT purposes, the Commissioner considers a commercial vehicle is: · designed for the principal purpose of carrying goods used for business or trade · not subject to LCT Commercial vehicles include: · trucks · hearses · some vans, for example, vans designed to carry a load of less than two tonnes, fewer than nine passengers and have a value over the LCT threshold Vehicles designed mainly for carrying passengers (including paying passengers) or for sport or recreation purposes are not commercial vehicles and may have luxury car tax payable for them. These vehicles include: · station wagons · passenger sedans · people movers · sport utility vehicles (SUVs) To work out the main purpose (principal purpose) for which a vehicle has been designed, we refer to Taxation Determination TD 94/19 Fringe benefits tax: is the method outlined in Taxation Ruling MT 2024 appropriate for determining whether a vehicle, other than a dual or crew cab, is 'designed for the principal purpose of carrying passengers' and thereby ineligible for the work-related use exemption available under subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 ? There are a number of factors that we consider, including but not limited to, the following: · the appearance and presentation of the vehicle · any relevant promotional literature · the emphasis evident in marketing · the vehicle's specifications · load carrying capacity · passenger carrying capacity You stated that you hold the modified vehicle as trading stock and promote and market it as a goods-carrying dual cab utility vehicle. Applying each of the factors listed in TD 94/19, we consider that the modifications you have made to convert the four-wheel drive to a dual cab utility, have significantly changed both the appearance of the vehicle and its characteristics to that of a commercial goods carrying vehicle. Accordingly, the modified vehicle is considered to be a commercial goods carrying vehicle for the purpose of the LCT Act, and is not subject to luxury car tax because it is not a luxury car. | Detailed Reasoning - Question 2: Generally, luxury car tax is payable when there is a taxable supply or taxable importation of a luxury car. Under paragraph 5-10(2) of the LCT Act, a supply is taken not to be a taxable supply of a luxury car when the recipient quotes for the supply. Section 9-5 of the LCT Act allows entities to quote their ABN to defer paying luxury car tax on the acquisition of luxury cars for the sole purpose of using them as trading stock. You advised that when you purchased the original vehicle, you quoted your ABN on the basis that you would hold the vehicle as trading stock.As such, the supply of the original vehicle to you is not a taxable supply of a luxury car under paragraph 5-10(2)(a) of the LCT Act. Therefore, there is no luxury car tax payable on the supply of the original vehicle to you. On request of the buyer, the original vehicle is modified to a dual cab utility vehicle.Modifications are completed prior to the sale of the modified vehicle to the buyer. As discussed in 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 luxury car tax payable on the sale of the modified vehicle.