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Some high-end utes exceed the luxury car tax threshold, but are they exempt from paying the 33 per cent tax?
Getting hit with the luxury car tax (LCT) can mean a substantial amount of money on top of the purchase price of your shiny new car.
As utes begin to climb in value and move away from being a cheap work car to a fully-fledged luxury family car, it’s becoming more common for them to exceed the LCT threshold of $76,950. So while all those added features and top-tier build quality are positive for consumers, they can come at a cost.
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The luxury car tax was introduced by the Howard government in 1999. It aimed to protect Australian-made cars and encourage Australian residents to purchase something locally built. It also sought to encourage manufacturers like Toyota to begin constructing their cars here and stimulate the economy by creating Australian jobs.
Fast-forward to 2024 and local manufacturing is non-existent, yet the luxury car tax is still in place at a whopping rate of 33 per cent. There have been calls to eliminate the luxury car tax since it was indexed to inflation, and the cost of new cars has risen. However, the luxury car tax has inadvertently hit more Toyotas than Porsches.
In a submission ahead of the May 2022–23 Federal Budget announcement, professional accounting body Certified Practising Accountants (CPA) Australia said the luxury car tax was a complex and costly “remnant” of the bygone era of Australian manufacturing.
How much is the luxury car tax?
As of 2024, the tax – which adds a 33 per cent tariff to each dollar above the threshold – now applies to vehicles above $76,950, or $89,332 for fuel-efficient vehicles.
For LCT purposes, the vehicle’s total price includes dealer delivery charges and optional extras, but excludes registration costs, GST and other on-road-related costs.
That means a luxury SUV like a 2024 Toyota LandCruiser 300 priced at $98,076 would attract an LCT amount of $6971, bringing the total to $105,047.
“Fuel-efficient vehicles” are defined as those claimed to consume less than 7.0L/100km, including electric and hybrid cars, with this fuel consumption threshold to increase by 5.2 per cent in the 2024/25 financial year.
But are utes subject to this luxury car tax despite being a work vehicle?
Does LCT apply to utes?
No, every ute available in Australia – including dual-cab utes – is exempt from paying LCT due to a loophole in how a vehicle’s “principal purpose” is determined.
While the rules can be confusing as they don’t specifically say all utes are exempt from the luxury car tax, the parameters to determine a vehicle’s main purpose are structured in a way that excludes utes from attracting the tax.
Given plenty of dual-cab utes serve the dual purpose of carrying passengers and goods, this leaves room for confusion.
However, in 2023, the ATO clarified this with its determination ‘LCTD 2023/1 Luxury car tax: how to determine the principal purpose of a vehicle‘. Based on this determination method, dual-cab utes are classified as ‘goods-carrying vehicles’ rather than ‘dual-purpose’ or ‘passenger’ vehicles.
Under the simplified formula for calculating whether a vehicle falls under the LCT threshold, a vehicle with a payload capacity over 50 per cent of its passenger-carrying capacity is exempt from LCT.
The Australian Taxation Department specifies: “In situations where there are several design purposes, one of which is the carrying of passengers, it will be a question of fact and degree whether that purpose is the principal purpose … [It] does not require that the principal purpose in question be assessed at over 50 per cent of purposes taken together, only that the principal purpose be objectively greater than each of the other design purposes”.
“The Commissioner will not apply compliance resources to review the supply of a utility vehicle (including single cab, dual cab, and extra cab utility vehicles) where the passenger carrying capacity is less than 50 per cent of the load carrying capacity.”
How to work out if your work vehicle is subject to LCT:
The official passenger-carrying capacity is set at 68kg per person times the number of seats. Every dual-cab ute on the market tops out at five seats, meaning they have a maximum passenger-carrying capacity of 340kg. This means that your ute only has to be rated for a payload of 680kg or more to be exempt.
Essentially, every dual-cab ute on the market in 2024 has this tax-exempt payload, including the Jeep Gladiator, which has a low 693kg payload.
You can also modify your car to turn it into a load-carrying vehicle and thus exempt it from the LCT as long as you get approval from the regulators that set the Australian Design Rules. You can read the full list of approved modifications that can exempt your car from LCT here.
The post Does the luxury car tax apply to utes? appeared first on Drive.
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