Thinking of buying a prestige vehicle or a high-end SUV? Before signing on the dotted line, there’s an important cost you need to factor into your budget — the Luxury Car Tax (LCT). Whether you’re purchasing for personal pleasure or business use, understanding the Luxury Car Tax threshold can help you avoid unexpected expenses and even influence your purchasing decision.
Let’s break down what this tax is, the current threshold you need to be aware of, and how to navigate it smartly.
What Is the Luxury Car Tax?
The Luxury Car Tax (LCT) is a tax imposed by the Australian Government on cars with a value above a certain limit. It’s designed to reduce demand for luxury vehicles and promote more fuel-efficient alternatives.
This tax is applied only to the portion of the car’s GST-inclusive value that exceeds the set threshold, and it primarily affects new car purchases.
Current Luxury Car Tax Thresholds (2023–24)
The LCT threshold is updated annually to account for inflation and evolving market trends. For the 2023–24 financial year, the thresholds are as follows:
| Vehicle Type | LCT Threshold (2023–24) |
|---|---|
| Fuel-efficient vehicles | $89,332 |
| Other vehicles | $76,950 |
Note: A fuel-efficient vehicle is defined as one with a fuel consumption of 7.0 litres per 100km or less.
If the car’s GST-inclusive price exceeds these thresholds, a 33% LCT applies to the amount over the limit.
For full and current details, you can refer to the official threshold information on the Australian Taxation Office’s website.
How Is LCT Calculated?
To better understand how the tax affects your car purchase, consider this simple example:
Example:
You’re purchasing a regular petrol SUV for $85,000 (GST inclusive). Here’s how the LCT is calculated:
- Threshold for non-fuel-efficient vehicles: $76,950
- Taxable amount: $85,000 – $76,950 = $8,050
- LCT payable (33%): 33% of $8,050 = $2,656.50
So, in this case, you would pay an additional $2,656.50 in LCT.
Who Pays the Luxury Car Tax?
The Luxury Car Tax is generally paid by the dealer or importer and is usually built into the retail price you are quoted. However, if you’re importing a luxury car privately, you’ll be responsible for paying the LCT.
It applies to:
- New car purchases
- Imported luxury cars
- Some demonstrator vehicles
But it does not apply to motorcycles, commercial vehicles designed for transporting goods (e.g., utes), or vehicles purchased for approved disability modifications.
Ways to Reduce or Avoid LCT
While LCT might appear unavoidable if you’re buying premium vehicles, there are some smart ways to minimize or bypass it legally:
- Choose fuel-efficient vehicles: You’ll benefit from a higher threshold, reducing or eliminating the taxable portion.
- Buy under the threshold: This may mean selecting a lower trim or opting out of optional upgrades.
- Consider used vehicles: LCT is typically only triggered for new vehicles.
- Business tax deductions: If buying through a business, you may be eligible for GST and LCT credits.
Does LCT Affect Car Financing or Leasing?
Yes — the presence of the Luxury Car Tax can impact your total loan amount or monthly lease payments, as it adds to the car’s total cost. This is crucial if you’re looking at novated leasing or using chattel mortgages through your business.
In some cases, financiers may also limit the financed amount on luxury vehicles, requiring a larger deposit upfront.
Final Thoughts
The Luxury Car Tax threshold plays a significant role in purchasing high-end vehicles in Australia. Being aware of the limits, rates, and exceptions can mean the difference between staying within your budget or facing thousands in surprise taxes. Whether you’re a car enthusiast or a tax-savvy buyer, knowing how LCT works ensures you’re in the driver’s seat — financially and literally.
By planning strategically, comparing fuel efficiency, and consulting trusted resources like the ATO, you can make an informed, cost-effective luxury car purchase.
Sufiyan, a passionate IT professional and finance enthusiast dedicated to simplifying financial clarity for every Australian. With years of experience in both tech and personal finance, Sufiyan oversees all content to ensure accuracy, usability, and relevance.