GST Income Tax Legislation

Luxury cars and hire purchase

Most luxury cars are financed in some way or another – although a car salesman friend of mine says a man wanted to buy his $80,000 BMW with cash, real notes. Maybe the car was still financed in some way (like mafia financed…).

Picture 9

But this does beg a tax question? Does the luxury car tax value for a car acquired under a hire purchase agreement include the consideration provided for the supply of credit under the agreement?

The answer seems an obvious NO. And the Commissioner agrees in Draft Luxury Car Tax determination LCTD 2013/D1. He state the finance does not effect the “price” of the car.

To quotes from the Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 1 ):

The amendments are not intended to affect the calculation of luxury car tax. In working out whether a car is a luxury car with respect to exceeding the luxury car tax threshold, only the price of the car is taken into account. The price includes GST and customs duty and does not include any luxury car tax, or any other Australian tax, fee or charge. The GST-inclusive price of the supply of credit is not relevant to the calculation.

The supply of the car and the supply of the credit continue to be treated as two separate supplies.

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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