Understanding the Luxury Car Tax (LCT)

How does the Australian Luxury Tax work?

There are 3 things you must know about the LCT:

 What is the Luxury Car Tax?

The LCT is a tax applied to vehicles with a price over $63,184.

The LCT rate is 33% and it is charged on vehicles under two years old. If the car is being sold for second time, there is a tax credit for the entire amount of LCT paid when it was first sold. Hence, unless the second-hand car that you are buying has actually increased in value, there is no LCT to be paid.

Technically the Luxury Car Tax – also known as LCT – is debited from the car seller, however, the dealer will systematically transfer this cost on to the car buyer.

Luxury car tax

How is the LCT calculated?

The Luxury Car Tax rate is 33% and the tax is payable on any car that has a sale price inclusive of GST (Goods and services tax) but exclusive of other government taxes, over the LCT threshold ($63,184). The LCT is only payable on the portion of the car sale price – GST excluded – that is over the threshold.


For a better understanding have a look at the following example:

If the car price is $100,000 including GST, but excluding dealer charges and other government fees. First we need to calculate the price of the car above the LCT: $100,000 – $63,184 = 36,816

Then we need to eliminate the GST of this price: $36,816 / 1.1 = $33,469.

Finally, to obtain the LCT we need to take 33% of this value: LCT = 33% x $33,469 = $11,044.77.

This number is then added to the car price. Hence the price you will need to pay will be $111,044.77.

Furthermore, if you add some options to the car like upgraded wheels etc. the price will change and so the LCT. This also means that a car that was not taxable by the LCT can become taxable if you add some options.


Can I avoid the LCT?

The short answer is no. However if you are part of a very small niche of people buying a very particular kind of car, you may be able to avoid paying LCT.

Some exceptions:

  • Commercial vehicles that can carry more things that people by weight are exempt from LCT.
  • Vans or trucks that can carry more than 2 tonnes worth of gear on-board are exempt from LCT.
  • Motorhomes, campervans and GST exempt vehicles also avoid the LCT.
  • Vehicles fitted out especially to carry disabled persons avoid the Luxury Car Tax too.

You can also pay less LCT if you choose a fuel efficient vehicle. Cars with a highway and city cycle fuel economy rating of 7.0L / 100km or less are subject to a higher LCT threshold ($75,375).


Want to save money? Why not import a car from the UK to Australia?

The deregulation of the Australian car market in 2018 will bring plenty of benefits for private buyers. A significant price gap between UK and AU cars emerges on vehicles with price above AU$63,184. Read more about the benefits from importing a UK car to Australia.

At AUCO, we would be happy to help you with the car sourcing and the car shipping.

If you have any queries feel free to call us on +44 (0) 20 8988 7716 or to email us at ozukcars@gmail.com.