Luxury Car Tax Australia: Thresholds, Exemptions, and Refunds

The Luxury Car Tax in Australia adds 33% to the portion of a new or near-new car’s value that sits above a set threshold. For the 2025–26 financial year, that threshold is $80,567 for most vehicles and $91,387 for fuel-efficient cars.1Australian Taxation Office. Luxury Car Tax Rate and Thresholds LCT is paid by dealers when they sell a car above the threshold, and by individuals who privately import one. It applies only to vehicles that are two years old or less.

Thresholds and Rate for 2025–26

Two thresholds apply, and both are unchanged from 2024–25 because the annual indexation factor came in below 1, which means the thresholds could not legally rise.1Australian Taxation Office. Luxury Car Tax Rate and Thresholds

  • Fuel-efficient vehicles (3.5 L/100 km or less): $91,387
  • All other vehicles: $80,567

The tax rate on the excess is a flat 33%.

The 2025 Change to “Fuel-Efficient”

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 tightened the fuel-efficiency test from 1 July 2025. The cutoff was halved from 7 litres per 100 km to 3.5 litres per 100 km, so most conventional hybrids and many plug-in hybrids no longer qualify for the higher threshold.2Australian Border Force. Australian Customs Notice No. 2025/13 The higher $91,387 threshold now mainly benefits fully electric vehicles and very efficient plug-in hybrids. The same Act aligned the indexation method for both thresholds so they move in step going forward.1Australian Taxation Office. Luxury Car Tax Rate and Thresholds

Which Vehicles Are Covered

A “car” for LCT purposes is any motor vehicle (excluding motorcycles) designed to carry less than two tonnes and fewer than nine passengers. That takes in sedans, SUVs, station wagons, and utes configured for passenger use. Limousines are always classified as cars under the Act regardless of seating, so a stretched limo carrying 14 people is still within scope.3Australian Taxation Office. When LCT Applies

The vehicle must also be two years old or less. A car counts as more than two years old if it was manufactured in Australia or imported more than two years before the sale date.3Australian Taxation Office. When LCT Applies A three-year-old prestige car sold second-hand does not attract LCT, however expensive it is.

Buying a commercial-looking ute doesn’t automatically get you out of LCT. The ATO looks at the vehicle’s principal purpose as designed by the manufacturer. A dual-cab ute the manufacturer classifies as a passenger vehicle, and that fits the two-tonne, nine-passenger definition, is still a car.

Vehicles and Situations Exempt From LCT

Some categories sit outside LCT entirely, however expensive the vehicle:4Australian Taxation Office. When Luxury Car Tax Doesn’t Apply

  • Commercial vehicles designed mainly to carry goods, such as heavy trucks and cargo vans.
  • Motor homes and campervans configured for temporary living quarters.
  • Emergency vehicles including ambulances, fire trucks, police vehicles fitted with sirens and warning lights, and marked search-and-rescue vehicles.5Australian Taxation Office. Definitions – Luxury Car Tax
  • Cars exported as GST-free supplies.

Disability modifications made specifically for driving by, or transporting, a person with a disability are excluded from the taxable value, though LCT still applies to the base car.

What Counts Toward the LCT Value

The LCT value is the retail price of the car including GST, any customs duty, and dealer delivery charges.6Australian Taxation Office. Working Out the LCT on a Sale Accessories, modifications, and treatments added before delivery or arranged through the dealer count too. Upgraded wheels, premium paint, a dealer-fitted tow bar—all of that lifts the LCT value.

These items are excluded:6Australian Taxation Office. Working Out the LCT on a Sale

  • Government charges such as stamp duty, transfer fees, and registration.
  • Compulsory third-party insurance.
  • Extended warranties and service plans.
  • Disability adaptations for driving by, or transporting, a person with a disability.

Keep detailed records that separate vehicle costs from these excluded items. The ATO can audit an LCT assessment, and clean documentation is the easiest way to defend your numbers.

How LCT Is Calculated

The formula for a domestic sale is:6Australian Taxation Office. Working Out the LCT on a Sale

(LCT value − LCT threshold) × 10 ÷ 11 × 33%

The × 10 ÷ 11 step strips the GST component out of the excess so you’re not paying LCT on top of GST. A worked example for a non-fuel-efficient car with an LCT value of $100,000:

  • Excess above threshold: $100,000 − $80,567 = $19,433
  • Remove GST component: $19,433 × 10 ÷ 11 = $17,666.36
  • Apply 33%: $17,666.36 × 0.33 = $5,829.90

That $5,829.90 is the LCT payable on top of the sale price and GST. A fuel-efficient vehicle at the same price would use the $91,387 threshold, producing a much smaller bill.1Australian Taxation Office. Luxury Car Tax Rate and Thresholds

LCT on Private Imports

If you import a car yourself, the LCT value is built differently. It includes the customs value of the car, international shipping and insurance, any customs duty, and the GST on the import.7Australian Taxation Office. Working Out the LCT on an Import Parts and accessories shipped with the car and reasonably expected to be fitted to it are rolled in as well. Once you have the total, the same formula applies.

You pay the LCT amount directly to the Department of Home Affairs during customs clearance, along with any customs duty.7Australian Taxation Office. Working Out the LCT on an Import The car won’t be released until those obligations are settled, so budget for LCT before the vehicle arrives.

Quoting an ABN as a Business Buyer

If you’re registered for GST and will use a luxury car strictly for a “quotable purpose,” you can quote your ABN to the supplier and defer the LCT. Quotable purposes are narrow:8Australian Taxation Office. Quoting an ABN

  • Holding the car as trading stock (not for hire or lease).
  • Carrying out research and development for the car’s manufacturer.
  • Exporting the car GST-free.

The list of things that don’t qualify is longer and trips up many business buyers. You cannot quote your ABN to avoid LCT on a car used as an executive vehicle, for salary packaging, for promotion or sponsorship, for personal use, for rally or race driving, or as a capital asset of the business.8Australian Taxation Office. Quoting an ABN These restrictions apply throughout the period you hold the car, even if you intend to sell it later.

If you quote your ABN for a quotable purpose and the use later changes, say the car becomes a director’s daily driver, you owe the LCT at that point and must report it on your next Business Activity Statement. Quoting your ABN when you know the car won’t be used for a quotable purpose is a criminal offence.8Australian Taxation Office. Quoting an ABN

Refunds for Primary Producers and Tourism Operators

Two groups can claim some or all of the LCT back: primary producers such as farmers and graziers, and tourism operators. Both must buy an eligible vehicle, which means a four-wheel drive or all-wheel drive that is either a passenger car with at least 175 mm of ground clearance or an off-road passenger vehicle.9Australian Taxation Office. Special LCT Conditions for Primary Producers

Primary producers can claim up to $10,000 on one eligible vehicle per financial year.9Australian Taxation Office. Special LCT Conditions for Primary Producers GST-registered tourism operators can claim on all eligible cars with no per-vehicle cap, but they must provide evidence they run a genuine business (licences, permits, or documentation of tourism activities) and claim within four years of purchase or import.10Australian Taxation Office. Application for Luxury Car Tax Refund – For Primary Producers and Tourism Operators Leased vehicles are not eligible for either refund.

Reporting, Paying, and Penalties

Dealers and other businesses report LCT on their Business Activity Statement. Label 1E is for LCT payable and 1F for LCT refundable.11Australian Taxation Office. Luxury Car Tax (LCT) Private importers don’t use a BAS; they pay at the border through the Department of Home Affairs during customs clearance.7Australian Taxation Office. Working Out the LCT on an Import

Late or incorrect LCT reporting has real consequences. The ATO charges a General Interest Charge on any unpaid balance, compounding daily. For the first half of 2026 the GIC rate sits between 10.65% and 10.96% per year depending on the quarter.12Australian Taxation Office. General Interest Charge (GIC) Rates That adds up quickly on a five-figure tax bill.

Failing to lodge the BAS on time triggers a separate failure-to-lodge penalty calculated in penalty units, at one unit for every 28-day period (or part of one) the return is overdue, up to a maximum of five penalty units.13Australian Taxation Office. Failure to Lodge on Time Penalty Medium withholders face double these penalties and large withholders face five times. Deliberately quoting an ABN for a non-quotable purpose is a criminal offence and can lead to prosecution.8Australian Taxation Office. Quoting an ABN