A Guide to ATO Luxury Car Tax

Luxury car tax (LCT) is paid on cars that have an inclusive value above a threshold set and revised by the ATO every year. In simpler terms, it's a tax imposed on vehicles considered luxury.

LCT is reported and paid to the ATO by businesses and individuals when they import luxury vehicles. Businesses might also need to know about LCT when trading cars. More on that below. 

If you buy a car in Australia as an individual, the tax is already included in the sticker price. 

How much is luxury car tax? 

The luxury car tax is 33% for the 2024-2025 financial year. It applies to the value exceeding the luxury car threshold. 

What is the 2024-2025 LCT threshold? 

There are two thresholds for this financial year: one for fuel-efficient vehicles and one for all other cars. If the ATO defines a car as fuel-efficient, meaning that it consumes less than 7 L per 100 km driven, it can be more expensive before you need to pay LCT. 

• LCT threshold for fuel-efficient cars: $91,387
• LCT threshold for other vehicles: $80,567

This threshold amount differs and is revised each year by the ATO.

LCT calculator 

Use the calculator below to estimate the luxury car tax you need to pay when importing a vehicle. If the result is $0, your car is under the threshold, and no LCT will be levied.

Note, that if the importation of the car is GST-free, the LCT on the vehicle is increased by an amount equal to the amount of GST that would otherwise have been payable.

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Formula for manual LCT calculation

This formula calculates the amount of luxury car tax owed by determining the value above the threshold, adjusting for goods and services tax (GST), and then applying the 33% luxury car tax rate.

(LCT value − LCT threshold) × 10 ÷ 11 × 33%.

The LCT value includes the car's retail price, GST, customs duty, dealer delivery charges, warranties, and additional items such as accessories and modifications. 

It does not include LCT itself, other Australian taxes, stamp duty, transfer fees, registration, compulsory third-party insurance, extended warranties, financing costs, or service plans.

How LCT works

Businesses selling or importing luxury cars must hold registration for both GST and LCT. They must also report and remit LCT through their Business Activity Statement (BAS). Individuals importing luxury cars for personal use must also settle LCT upon arrival.

Luxury car tax applies to cars aged two years or less, encompassing the retail price, GST, and associated expenses but excluding the actual LCT amount and other Australian taxes. 

Specific exemptions exist where LCT does not apply, such as for emergency vehicles, select commercial vehicles, and modifications catering to individuals with disabilities.

For imported vehicles, LCT is calculated based on the car's customs value, along with international transport costs, insurance charges, customs duty, and GST. If the vehicle's LCT value surpasses the threshold amount, then LCT is applied to the excess amount.

Records you need to keep

To substantiate LCT transactions, you should keep records of: 

• Invoices
• Receipts
• Importation documents 
• Written statements from previous owners or suppliers detailing the previously paid LCT amount

This paperwork will help you stay compliant with the ATO and facilitate refund claims and adjustments. 

Vehicles subject to luxury car tax

LCT applies to:

• Cars - including station wagons and four-wheel drive vehicles
• Limousines, which carry a load of less than two tonnes and fewer than nine passengers. 

The ATO has implemented a higher LCT threshold to incentivise more Australians to use electric cars. For the fiscal year 2024-25, the threshold for fuel-efficient vehicles (those with a fuel consumption of 7 L per 100 km) is $91,387.

Important: From July 1, 2025, the definition of a fuel-efficient vehicle will change. It must have an advertised combined fuel consumption figure of less than 3.5L per 100km. 

Motorcycles and commercial vehicles used for carrying goods are not subject to LCT.

When is the tax paid

LCT is only paid when the sale goes through or when the luxury car is imported. 

If you are a business registered for GST and LCT, you will report and pay LCT on your business activity statement (BAS). For individuals importing a car, LCT is paid when the car gets to Australia. 

How to avoid paying LCT

The only way to avoid the luxury car tax is if: 

• The recipient has provided an ABN in the correct format
• The vehicle was made or brought into the country more than two years before it was sold
• The vehicle is being exported as an ‘exempt from GST’ export
• The vehicle is registered for emergency use (ambulance, fire truck, police car, or search and rescue)
• It's a motorhome or a camper van
• It’s a commercial vehicle mainly designed for transporting goods
• Adaptations for individuals with disabilities have been made
• The vehicle is bought by a recognised public institution (a museum, a gallery, or a library) specifically for public exhibition as an artistic work or collector's item.

If these don’t apply to you, consider buying and importing a luxury car that’s over two years old, as it will be exempt from LCT. 

Consequences

Not paying LCT will lead to penalties. This could include fines and accruing interest on the outstanding tax you owe. 

It’s crucial to promptly fulfil LCT obligations to avoid costly penalties. 

Getting a refund

If you think you've paid too much LCT or qualify for a refund, you can claim an LCT credit on your BAS if you're GST and LCT registered. You can request a refund directly from the ATO if you're not registered for GST and LCT.

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