Private ruling: LCT and LCT payable on cars imported after repairs/renovation/refurbishment
Published: August 2014
Ruling period: Not applicable
Date scheme commenced: None applicable

Ruling: Q1: 1. Is Luxury Car Tax (LCT) payable on a vehicle which was exported for repair/restoration/refurbishment and re- imported in to Australia using Schedule 4 item 16 of the Customs Tariff Act 1995? 2. If LCT is payable in relation to Question 1, what is the value of the imported car on which the LCT is calculated on? | A1: 1. Yes. LCT will payable on a vehicle which was exported for repair/restoration/refurbishment and re- imported in to Australia using Schedule 4 item 16 of the Customs Tariff Act 1995. 2. Please refer to the reasons for decisions.

Relevant facts and circumstances: • The entity intends to supply a co-ordinated service to clients in arranging transport overseas with export and import clearance of customers' personal vehicles. • The entity will arrange repair/restoration/refurbishment of the vehicles to agreed customer specification by a specialist company overseas using overseas manufactured parts. • The entity will arrange the transport back from overseas after the vehicle has been modified as per customers' specifications. • The value of the vehicles after the modification is anticipated approximately $xxx,xxx. • The vehicles concerned are 1990 to 1994 yyy and are currently registered in Australia with Road Worthy Certificate. • The entity's customers retain ownership and hold the registration at all times during the process. • In future this program will extend to other types of vehicles which were all manufactured and imported into Australia prior to 1990. • The vehicles will be imported after the modifications using Item 16 in Schedule 4 to the Customs Tariff Act 1995. • The vehicles will be accompanied by full paper work from the overseas repairer as to repairs done, price and countries agreed preference declaration.

Relevant legislative provisions: A New Tax System (Luxury Car Tax) Act 1999 - paragraph 5-10(2)(b) | A New Tax System (Luxury Car Tax) Act 1999 - section 7-10 | A New Tax System (Luxury Car Tax) Act 1999 - paragraph 7-10(3)(c)) | A New Tax System (Luxury Car Tax) Act 1999 - section 7-20 | Customs Tariff Act 1995 - subsection 18(1)

Reasons for decision: Summary: Section 7-5 of the A New Tax System (Luxury Car Tax) Act 1999 (the LCT) provides that you must pay the Luxury Car Tax (LCT) on any taxable importation of a luxury car that you make. Section 7-10 of the GST Act provides that you make a taxable importation of a luxury car if the luxury car is imported and you enter the car for home consumption. The importation of the car includes any car parts, accessories or attachments that you import at the same time as the car and that could reasonably be expected to be fitted to the car. However, you do not make a taxable importation of a luxury car if you quote for the importation of the car; or LCT has already become payable in respect of the car; or the car is covered by items 10,11,15,18,21 or 24 in Schedule 4 to the Customs Tariff Act 1995; or the importation of the car is a non-taxable re-importation. We note that item 16 in Schedule 4 to the Customs Tariff Act 1995 is not included in the LCT Act in relation to the requirements of not making a taxable importation of a luxury car. LCT is payable on a taxable importation of a car that exceeds the LCT threshold for the relevant financial year. The LCT threshold for the financial year ending 2014-15 is $61,884 and $75,375 for fuel-efficient cars. You contend that if the repairs, renovation and/or refurbishment work are carried out in Australia rather than overseas, LCT is not payable on the final product of the cars as there is no sale and the cars have always remained the property of the owners during the entire repair process. Unlike the goods and services tax, LCT does not apply to repairs, renovation and/or refurbishment work that are carried out in Australia. However, LCT applies to the supply of a car in Australia where the car is sold for an amount over the LCT threshold; inclusive of the repairs, renovation and/or refurbishment work that are carried out in Australia. There is no provision in the LCT Act to allow the cars to be imported after the repairs, renovation and/or refurbishment work carried out overseas, as a non-taxable re-importation. Section 7-20 of the LCT Act deals with the meaning of non-taxable re-importation of cars. A non-taxable re-importation includes situations where the car was exported from Australia and the car is returned to Australia, without having been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since its export. In this case the re-imported cars will be subject to modifications and alterations according to the customers' specifications. Therefore, section 7-20 of the LCT Act will not be applicable to those cars. You referred to GATT Article III paragraph 2 which says, "The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products." The internal taxes and charges referred in GATT Article III paragraphs 1 and 2 are in relation to affording protection to domestic production. Please note that LCT is payable on supplies made by domestic car manufacturers/producers, sellers/resellers as well as importers where their cars meet the definition of a taxable supply under sections 5-10 and 7-10 of the LCT Act and are over the thresholds mentioned above. The two years old rule referred in paragraph 5-10(2)(b) of the LCT Act does not apply in relation to the importation of luxury cars that were returned to Australia after having been subjected to any treatment, industrial processing, repair, renovation, alteration or any other process since they were exported. Your customers would be re- importing the cars for their own use and not for sale. It is to be noted that LCT applies to taxable importations of luxury cars regardless of whether or not the entity importing is registered or required to be registered. To reiterate, the value of the cars that will be imported by your customers exceed the LCT threshold and the cars are entered into Australia for home consumption; the importation of those cars would include new parts, accessories attached to the cars at the time of the importation. Therefore, the importation of cars from overseas after repair, renovation and/or refurbishment carried on by the specialised Company would satisfy the requirements of a taxable importation of a luxury car as per section 7-10 of the LCT Act and liable to LCT. • The following amounts should be included in the calculation of LCT on the taxable importation of luxury cars: • the customs value of the car and of any car parts, accessories and attachments included in the importation • the costs of international transport of the car to the place of consignment in Australia, plus insurance (to the extent that these costs are not already covered in the customs value) • customs duty payable, and • GST payable (or, in the case of wholly or partly GST-free car for the disabled, the amount of GST that would otherwise be payable).