The Tax on Luxury Cars Has Got a Little Cheaper
Have you got your eye on a luxury car or perhaps something that is a little more fuel-efficient and environmentally friendly? There is a new tax change that could help you buy something a little more la-de-da.
Have You Heard About the Luxury Car Tax (LCT) Threshold?
Basically, if you buy an imported car with a GST-inclusive value that is above the LCT thresholds, the tax man slugs you with an extra 33% on the exceeded amount (minus the GST component). But the good news is the LCT thresholds have just been given a decent boost – the third one in a row.
From the 1st of July 2022, the threshold has been boosted by $5,257 for $84,916 for fuel-efficient vehicles, and by $2,697 to $71,849 for other regular vehicles (all include GST).
According to the ATO, a fuel-efficient vehicle is one with fuel consumption that does not exceed 7.0L/100km on the combine cycle.
So, before your fixed period ends, get in touch with us and we can help you explore your options. This takes us to refixing and refinancing.
How Does the LCT Threshold Work?
This threshold boost is not just good for people wanting to buy a vehicle under the threshold, it will also make cars above the threshold more affordable too.
For example, say you want to buy a Tesla Model 3 Performance which has a GST-inclusive price of $93,325. Under last financial year’s LCT threshold of $79,659 for fuel-efficient vehicles, you would have paid a LCT tax of $4,100 (exceeds LCT threshold by $13,666, subtract GST component paid, multiply by 33% – $4,100 LCT).
But now that the LCT threshold to fuel-efficient vehicles has been boosted to $84,916, you would only pay LCT of $2,522 ($8,409 – GST components paid x 33% = $2,522).
And if you wanted to avoid paying the LCT altogether, you could instead purchase a Model 3 Long Range, which has a GST-inclusive price of $81,725. That means this financial year it is below the LCT threshold, but last year you would have been slugged with an LCT of $620. Seeking advice on financial planning can help navigate such considerations effectively.
What is the Luxury Car Tax (LCT)?
The Luxury Car Tax (LCT) is a tax imposed on imported cars with a GST-inclusive value that exceeds certain thresholds. The tax rate is an extra 33% on the amount that exceeds the LCT threshold, minus the GST component.
What are the new LCT thresholds effective from July 1, 2022?
From July 1, 2022, the LCT threshold has been increased to $84,916 for fuel-efficient vehicles and $71,849 for other regular vehicles. Both amounts include GST.
How does the LCT threshold affect the cost of luxury cars?
The increase in the LCT threshold makes luxury cars more affordable. For example, if you want to buy a Tesla Model 3 Performance, which costs $93,325, the LCT would now be $2,522 compared to $4,100 under the previous threshold.
What qualifies as a fuel-efficient vehicle?
According to the ATO, a fuel-efficient vehicle is one with fuel consumption that does not exceed 7.0L/100km on the combined cycle.
How can Zippy Financial assist me in financing a luxury car?
Zippy Financial can help you explore various finance options to purchase a luxury car, whether for business or personal use. They specialize in home loans, property investment, and vehicle finance.
Are there any vehicles that are now below the LCT threshold due to the increase?
Yes, some vehicles like the Tesla Model 3 Long Range, which has a GST-inclusive price of $81,725, are now below the new LCT threshold for fuel-efficient vehicles.
Get in Touch to Explore Your Finance Options
If you have got your eye on a particular vehicle, luxury or not, and you would like to explore some finance options to help purchase it, give us a call! We can help you find the right loan for your circumstances, depending on whether the vehicle is for business, personal use or a mix of both.
Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Connect with Louisa on Linkedin.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial. r-less normal distribution of letters. making it look like readable English.
