When it comes to buying a car, the cost of the vehicle is not the only expense to consider. Depending on the value of the car, you may also be liable for Luxury Car Tax (LCT). This tax is imposed on cars with a value that includes GST above certain thresholds. In general, the value of a car includes the cost of any parts, accessories, or modifications that you have supplied or imported at the same time as the car.
The maximum value you can use to calculate your LCT is the car limit (regardless of how much you were paid for a trade-in) in the year you first used or leased the car. If you buy a car and the price exceeds the LCT car limit, the maximum amount of GST credit you can claim is one-eleventh of that limit. From a buyer's perspective, when the tax is paid, it will already be factored into the price quoted by a car dealership or depot. A “luxury car” is defined as a motor vehicle designed to carry a load of less than two tons and less than nine passengers, with a price including GST that exceeds the luxury car tax threshold. The Income Tax Assessment Act 1997 (ITAA9) places a limit on the amount of depreciation that can be claimed as a tax deduction and the New Tax System (Goods and Services Tax) Act 1999 (GST Act) also imposes a limit on the amount of GST that can be claimed with compared to a luxury car.
So, can luxury car tax be capitalised? The answer is yes. When you purchase a luxury car, you are liable for LCT. This tax is factored into the price quoted by dealerships and depots, so it is important to factor this into your budget when considering buying a luxury vehicle.