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General information only: Tax, registration, insurance and credit rules can change. Confirm the current position with the linked government authority and your finance or insurance contract before acting.
Quick answer
Luxury car tax is a federal tax generally applied when a business sells or imports a car whose LCT value exceeds the applicable indexed threshold. The 33% rate applies to the GST-exclusive portion above the threshold—not to the car’s entire value.
Why this matters when financing a car
In an ordinary dealer purchase, LCT is generally already reflected in the vehicle price. It therefore increases the purchase price and potential loan amount, while the financier may still assess the vehicle against its own valuation and loan-to-value limits.
The formula and what it actually taxes
The ATO formula for a taxable sale is: (LCT value − applicable LCT threshold) × 10 ÷ 11 × 33%. The 10 ÷ 11 adjustment removes GST from the amount above the threshold before the tax rate is applied.
This is why multiplying the full drive-away price by 33% is wrong. The threshold for the relevant financial year and vehicle category must be identified first.
What can be included in the LCT value
ATO guidance says the LCT value for a sale includes the retail price with GST and customs duty, dealer delivery, standard and statutory warranties, and relevant accessories, modifications or treatments supplied before delivery or under an arrangement with the supplier.
The legislation excludes LCT itself and other Australian taxes, fees or charges other than GST and customs duty. This is why registration and stamp duty should not simply be assumed to form part of the LCT value. Use the dealer’s itemised calculation for the actual vehicle.
Which threshold applies
The ATO publishes indexed thresholds for each financial year, including a higher limit for qualifying fuel-efficient cars. Under the current law, the fuel-efficient test uses a combined fuel-consumption limit of 3.5 litres per 100 kilometres.
Use the delivery or import timing and the ATO’s current threshold page. A quote produced in one financial year may need to be recalculated if delivery occurs in another.
Not every expensive ute is automatically exempt
A vehicle designed mainly to carry goods rather than passengers can fall outside the LCT definition, but the test is based on the vehicle’s principal design purpose. Marketing language or the owner’s intended business use does not settle the classification.
The ATO’s LCT Determination explains the approach for dual-cab and multipurpose vehicles. Ask for the dealer or importer’s basis rather than assuming every ute or commercial-looking vehicle is excluded.
What a buyer should check
For a dealer purchase, ask for a written, itemised price showing whether LCT is included and which threshold has been used.
- The relevant financial year and delivery date
- The applicable standard or fuel-efficient threshold
- The LCT value before LCT is added
- Accessories or treatments arranged before delivery
- Whether an exclusion is being claimed and the basis for it
Illustrative LCT calculation
Assume only for this example that a car has an LCT value of $100,000 and the applicable threshold is $80,000. These are teaching inputs, not current thresholds.
- Amount above the assumed threshold: $100,000 − $80,000 = $20,000.
- Remove GST from that excess: $20,000 × 10 ÷ 11 = $18,181.82.
- Apply 33%: $18,181.82 × 33% = $6,000.
Result: The illustrative LCT is $6,000. It is not $33,000, because the rate applies only to the GST-exclusive portion above the applicable threshold.
Primary sources
Government and statutory sources checked on 8 August 2026:
- ATO — luxury car tax rate and thresholds
- ATO — working out the LCT amount
- Luxury Car Tax Act 1999 — section 5-20
- ATO LCTD 2023/1 — principal purpose of a vehicle
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