Got your eye on a luxury car that’ll make your mates jealous? Or perhaps something that’s a little more fuel-efficient and environmentally friendly? Today we’ll run you through 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’s above the LCT thresholds, the tax man slugs you with an extra 33% tax on the exceeded amount (minus the GST component).
But the good news is the LCT thresholds have just been given a pretty decent boost – the third one in a row.
From July 1, the threshold has been boosted by $5,257 to $84,916 for fuel-efficient vehicles, and by $2,697 to $71,849 for other regular vehicles (all inc. GST).
According to the ATO, a fuel-efficient vehicle is one with fuel consumption that doesn’t exceed 7.0L/100km on the combined cycle.
How does the LCT threshold work?
Ok, so this threshold boost isn’t just good for people wanting to buy a vehicle under the threshold.
It’ll also make cars above the threshold more affordable, too.
Let us explain.
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 for fuel-efficient vehicles has been boosted to $84,916, you would only pay LCT of $2522 ($8,409 – GST component paid x 33% = $2522).
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’s below the LCT threshold, but last year you would have been slugged with a LCT of $620.
Get in touch today to explore your finance options
If you’ve got your eye on a particular vehicle – luxury or not – and you’d like to explore some finance options to help purchase it, give us a call today.
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!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.Do you like what you've read? Subscribe for free to receive my blog posts in your email inbox. While you are at it you can tick the box and get access to all my real estate training videos.