Private ruling: Luxury car tax
Date of advice: 23 February 2024
Published: 15 April 2024
Ruling period: 1 July 2023 to 30 June 2024 | 1 July 2024 to 30 June 2025
Date scheme commenced: 1 July 2023

Ruling: Q1: Is luxury car tax payable on the importation of the Race Cars (specifically designed for racing and rally circuits) for the purpose of competition only? | A1: No.

Relevant facts and circumstances: You are registered for the Goods and Services Tax (GST). The Race Cars are manufactured overseas and will be imported into Australia for commercial racing purposes. The Race Cars have permanent features and components of a racing car that would not be found on a typical car driven on public roads. For example, FIA approved safety roll cage, six point racing seatbelts, extensive bodyshell modifications, race seats etc. The Race Cars are vehicles that are specifically designed for use on rally or racing circuits and cannot be registered anywhere in the world for general use. A non-RAV Entry Import Approval obtained. Approval type, 'Race or Rally'. The total purchase price of the vehicles exceeds the luxury car tax threshold.

Relevant legislative provisions: A New Tax System (Luxury Car Tax) Act 1999 section 7-5, | 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: The liability for luxury car tax (LCT) arises when a taxpayer makes a taxable importation of a luxury car, under section 7-5 of A New Tax System (Luxury Car Tax) Act 1999 (LCT Act). An exception to this rule is if the vehicle imported is not a luxury car within the LCT Act. Section 25-1 of the LCT Act defines 'luxury car' as: a car whose luxury car tax value exceeds the luxury car tax threshold. Section 27-1 of the LCT Act defines 'car' as: 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). In turn, 'motor vehicle' is defined as: a motor-powered road vehicle (including a 4 wheel drive). As the Race Cars are motor-powered and designed to carry a load of less than 2 tonnes and fewer than 9 passengers, the issue then is whether the Race Cars are 'road vehicles'. 'Road vehicle' is not defined in the LCT Act. However, guidance can be drawn from the Goods and Services Tax Advice GSTA TPP 077 ('ATO Ruling') which explored the definition of a 'car' and, relevantly, 'motor vehicle' for the purposes of input tax credit claims. The ATO Ruling referred to paragraph 3.2 of the Sales Tax Ruling SST 13 stating the following: The term 'road vehicle' refers to the class of vehicle, not to the actual use to which a particular vehicle may be put. It is a road vehicle if it is in a class of vehicle that is designed for use on public roads, and it would be a road vehicle even though it may never be used or registered for use on public roads. Reference to the class of vehicle is further elaborated in the ATO Ruling accordingly: If the nature and fundamental design of a vehicle used as a rally or racing car, including any modifications or add-ons, makes it of a class of vehicle suitable and capable of being registered for use on public roads, anywhere in the world, it is a 'car' as defined.... For example, where a standard passenger car is modified for rallying or racing and the modifications do not extend to changing its fundamental design, it will remain a car. If the rally car or racing car, including any modifications or add-ons, is of a class of vehicle designed to be used only on racing or rally circuits or off-road, and is not capable of being registered for use on public roads, it is not a 'car' as defined.... For example, where a racing car is designed and built from the ground up, or a standard passenger car is redesigned, stripped and rebuilt so that nature and fundamental design of the vehicle makes it incapable of being registered for use on public roads, it is not a 'car'. The Race Cars have various permanent features and components of a racing car that would not be found on a typical car driven on public roads; for example, FIA approved safety roll cage, six point racing seatbelts, extensive bodyshell modifications, race seats, etc. The Race Cars will be imported for the purposes of competition only. The Race Cars are considered to fall within the class of vehicle designed to be used only on racing or rally circuits and is not suitable or capable of being registered for use on public roads. The vehicles are not 'cars' under section 27-1 of the LCT Act and therefore LCT is not payable on importation of the vehicles.