Luxury cars symbolise style, comfort, and come with a hefty price tag. As the Australian tax landscape has undergone a significant change, it has brought fresh air for those yearning for the allure of high-end automobiles. The Australian government has made a notable move by increasing the Luxury Car Tax (LCT) threshold and has offered a breath of fresh air to luxury car buyers.

Whether you are eyeing a sleek sports car or dreaming of cruising in a luxury SUV, this blog post will guide you about the latest threshold increase in Luxury Car Tax (LCT) and how it can impact your purchasing power. So let’s drive through! 

How is Luxury Car Tax (LCT) Calculated?

The Luxury Car Tax is a tax imposed on cars with a GST-inclusive value above a certain threshold. It is designed to target luxury and high-end vehicles, ensuring that those who can afford such luxury contribute to the tax system. The LCT is currently set at 33% of the amount exceeding the threshold.

Increased LCT Threshold for 2022-23

For the financial year 2022-23, the LCT threshold has been increased to reflect the changing market conditions and to provide some relief to luxury car buyers. The government has set a new threshold of $76,950 which is up from the previous $71,849. And for the fuel-efficient vehicles it is kept at $89,332 which is also up from $84,916. So this also means that if the GST-inclusive value of a car is equal to or less than $76,950, the LCT will not apply.

LCT Threshold over the Years

Implications for Consumers

The buyers of luxury cars are thrilled with this news. They now have a wider range of vehicles that fall into this segment which they can choose without worrying about the taxation burden. All you have to keep in mind is the threshold before buying your luxury car as that can impact your decision-making and also financial planning. 

Businesses and the Automotive Industry

What has this done for businesses and the automotive industry? Well, this increased LCT threshold will have a direct impact on them as with a higher threshold, more and more luxury vehicles will be exempt from the tax. This will directly boost sales and stimulate the market.

Car dealers and manufacturers can benefit from this and attract customers, offer competitive pricing, and get good profit. Businesses that are involved in the import and distribution of luxury vehicles will not have to worry about the compliance requirements and various administrative burdens associated with the LCT.

A Few Considerations to Look at: 

The increased LCT threshold no doubt is a piece of positive news for luxury car buyers and businesses. But there are a few key considerations to keep in mind before making the final purchase. They are listed below: 

• State Taxes

LCT as well now is a federal tax and a few states or territories may have additional taxes or charges on luxury vehicles. So make sure you familiarize yourself with the specific tax regulations in your area.

• Fuel Efficiency 

The LCT threshold increases but the tax rate remains the same at 33% of the amount. So it is crucial to consider the fuel efficiency and environmental impact of a luxury vehicle as this will directly affect the long-term costs and sustainability goals. 

• Consult with a Tax Accountant

Tax laws at times can be a complex affair. So if you are uncertain about the increased LCT threshold and how it can impact your taxation, it is best to consider a professional tax accountant. They will guide you with the required information to give you peace of mind. 

Conclusion 

Without any doubt, the news of the increased threshold of the Luxury Car Tax (LCT) 2022-23 has brought positive news for luxury car buyers and businesses in the automotive industry. With wider options available in the market, there is no stopping by! But before making a purchase, if you need any kind of information or consultation on its implication on your taxation, you can easily contact KPG Taxation. We have expert tax agents and accountants who can guide you and help you to navigate the changing tax landscape and make informed choices.