Where a vehicle exceeds a certain cost, it is subject to Luxury Car Tax (LCT). There are various provisions which apply to the calculation of LCT and the claimable depreciation on such vehicles. This support note explains these provisions and how to work with LCT using AssetManager Pro.
Luxury Car Tax generally applies to the purchase of motor vehicles over a threshold, previously this was also the Depreciation Car Limit however as of 2009-10 Luxury Car Tax thresholds were set separately to the Car Limits.
For GST purposes, the maximum GST credit that can be claimed, assuming 100 per cent business use, is one-eleventh (1/11) of the Threshold.
There are some vehicles that are excluded from these provisions, If you have any queries, please refer to the ATO or your accountant.
How much is the Car Limit?
As of the 2016-17 financial year, the limit is $64,132 and $75,526 for Fuel Efficient Motor Vehicles inclusive of GST and Luxury Car Tax. For a detailed listing of year by year thresholds refer to the LCT Tax Threshold Tables article.
How is the maximum claimable GST calculated?
The maximum claimable GST is calculated by dividing the LCT Threshhold by eleven.
For example:
$64,132 | = | $5830.18 |
11 |
|
|
How is Luxury Car Tax calculated?
Luxury Car Tax is levied at the rate of 33 per cent on the GST inclusive price of the car above the LCT Threshold
For the examples below, the following values have been used:
Tax Exclusive Price | $68856.74 |
GST rate | 10% |
Luxury Car Tax rate | 33% |
LCT Threshold 2016-17 | $64,132 |
| Tax-exclusive cost price | + | GST | - | LCT Threshold |
| $68,856.74 | + | $6885.67 | - | $64,132 | = | $18276.41 |
| $18276.41 | X | 10/11 | = | $16614.92 |
| $16614.92 | X | 33% | = | $5482.92 Luxury Car Tax (LCT) |
The total price paid is $81225.33 ($68856.74 + $6885.67 GST + $5482.92 LCT).
How does the Car Limit affect my asset cost?
There are two ways to calculate the effective cost of your asset, depending on whether you know the price of the asset before or after taxes have been applied.
If the tax-exclusive price is known
To calculate the effective cost of the asset, you can use the following formula:
Tax Exclusive Purchase Price | + | Unclaimable GST | + | Luxury Car Tax |
$68856.74 | + | ($6885.67 - $5224.18) | + | $5482.92 | = | $76001.15 |
If the tax-inclusive price is known
| Tax Inclusive Purchase Price | - | Claimable GST |
| $81311.13 | - | $5193 | = | $76116.13 |
What amount is my depreciation calculated on?
The cost for book and tax purposes is the same. In this example, the cost is $76113.13.
For book purposes, depreciation will be calculated based on the cost price of $76113.13.
For tax purposes, depreciation will be based on the Car Limit at the time of acquiring the asset. In this case, depreciation is calculated on $57,466.
How do I enter an acquisition with Luxury Car Tax?
There are two tax codes that relate to Luxury Car Tax.
The Luxury Car Tax (LCT) code deals specifically with the Luxury Car Tax rate and threshold.
The Consolidated Luxury Car Tax & GST (LCG) code combines the GST and Luxury Car Tax rates.
AssetManager Pro automatically creates the LCT & LCG tax codes.
The asset group that the asset is applied to needs to be set up as a Motor Vehicles group type.
The tax code that needs to be applied to the asset is LCG. If the purchase price is above the Luxury Car Tax threshold, Luxury Car Tax will be calculated. If the purchase price is under the Luxury Car Tax threshold, GST only will be calculated.
If you have purchased a motor vehicle that is exempt from Luxury Car Tax, you have the choice of entering the appropriate tax code.