Private ruling: Luxury car tax and fringe benefits tax
Date of advice: 15 January 2021
Published: March 2021
Ruling period: 20XX - 20XX income year | 20XX - 20XX income year | 20XX - 20XX income year | 20XX - 20XX income year | 20XX - 20XX income year
Date scheme commenced: 1 January 20XX

Ruling: Q1: Is the "the modified vehicle" a commercial vehicle designed for the principal purpose of carrying goods for the purposes of the A New Tax System (Luxury Car Tax) Act 1999 ? | A1: Yes | Q2: Does the modified vehicle qualify as an exempt vehicle pursuant to subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 ? | A2: Yes

Relevant facts and circumstances: You are registered for Goods and Services Tax (GST). You are a business. You will engage a third-party modifier to modify the design of vehicle models. These models are collectively referred to as 'the modified vehicles'. Photographs of the vehicles' body, before and after modification, have been provided. The modified vehicles are dual cab utility vehicles. The modified vehicles use a body-on-frame chassis and have a utility tray that is designed to carry heavy loads. The GVM of the vehicles are also upgraded. The Facility's GVM upgrade solution involves installation of various components. The modified vehicles comply with Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005 (ADR). The modified vehicle will also be fitted with a new compliance plate pre-registration, so that it can be re-classified from an 'off-road passenger vehicle (MC)' to a 'light goods vehicle (NA)' as defined under the ADR. The above modifications to the models will be permanent. The modified vehicle will be marketed as being able to be registered as a "light commercial" vehicle with new increased payload capacity. The modifications are completed prior to you supplying the modified vehicle to your customers.

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 | Fringe Benefits Tax Assessment Act 1986 subsection 8(2)

Reasons for decision: Detailed Reasoning - Luxury car tax (LCT): In determining whether a 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 motorcycle 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 four-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 would fall under the definition of a luxury car if its LCT value is above the LCT thresholds. 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). On completion of the modification for the vehicles' models, the vehicles will be single-cab or dual-cab utility vehicles with a load capacity of less than one tonne. This is based on the specifications provided. For clarity, each of the proposed modifications are considered to be 'permanent', per the Commissioner's view on the meaning of 'permanent' modifications as provided in Miscellaneous Taxation Ruling MT 2033 Fringe benefits tax: application of sub-section 8(2) exemption to modified cars . In order for one of the above single-cab or dual-cab utility vehicles to be exempt from LCT, it needs to be a commercial vehicle, which is not designed for the principal purpose of carrying passengers per paragraph 25-1(2)(c) of the LCT Act. To work out the principal purpose for which a single-cab, or dual-cab utility vehicle, which has a load capacity of less than one tonne has been designed, we rely on Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: Dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel. Paragraphs 14 to 16 of the MT 2024 detail the method to determine whether the principal purpose of a utility vehicle is directed to carrying goods or passengers and the relevant extracts state the following: 14) ...a dual cab that has a designed load carrying capacity of less than one tonne may still qualify for the work-related use exemption, under sub-section 8(2), if the vehicle is not designed for the principal purpose of carrying passengers. It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. This approach is consistent with that adopted under the Australian Design Rules in determining what is a passenger vehicle. 15) For this purpose the designed passenger carrying capacity is to be determined by multiplying the designed seating capacity (including the driver's) by 68 kg, which is the figure adopted for the purpose of the application of the Australian Design Rules. 16) If the total passenger weight so determined exceeds the remaining "load" capacity, the vehicle is to be treated as being designed for the principal purpose of carrying passengers... Applying the test in MT 2024 as detailed above to the specifications of the modified vehicles, the passenger capacity did not exceed the remaining load capacity. The modified vehicles are treated as not being designed for the principal purpose of carrying passengers. Furthermore, the modified vehicles are dual cab utility vehicles with the appearance and characteristics of goods carrying vehicles used for business or trade. Pursuant to the Commissioner's view in MT 2024, the modified vehicles are considered to be commercial vehicles designed for the principal purpose of carrying goods. Accordingly, pursuant to paragraph 25-1(2)(c) of the LCT Act, the modified vehicles will not be subject to luxury car tax because they are not 'luxury cars'. Where the principal purpose of any other vehicle (i.e. a vehicle that is not a single-cab, or dual-cab utility vehicle with a load capacity of less than one tonne), the principal purpose of the vehicle is determined by analysis of each of the factors detailed in Taxation Determination TD 94/19. For clarity, on consideration of each of the factors detailed in TD 94/19, the Commissioner furthermore considers that the modified vehicles are commercial vehicles designed for the principal purpose of carrying goods. Accordingly, pursuant to paragraph 25-1(2)(c) of the LCT Act, the modified vehicles will not be subject to LCT as they are not 'luxury cars'. | Detailed Reasoning - Fringe benefits tax (FBT):: Exempt car benefits are addressed in subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as follows: A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if: (a) the car is: (i) a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or ... (ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and ... On consideration of the facts, it is considered that each of the modified vehicles are dual-cab utility vehicles. Applying the test in MT 2024 as detailed at paragraphs 14-16 to the specifications of the modified vehicles, the passenger capacity did not exceed the remaining load capacity. The modified vehicles are treated as not being designed for the principal purpose of carrying passengers. Note that the private use of the vehicle by employees during a particular year of tax is limited to certain work-related travel and non-work-related use that is minor, infrequent and irregular. Accordingly, the modified vehicles satisfy the definition of a utility truck, which is not designed for the principal purpose of carrying passengers for the purposes of subsection 8(2) of the FBTAA.