1 July each year signifies the start of a new financial year and very often, a raft of changes to a range of taxes and other government fees and charges. We’re providing a broad-based update on some of the changes, which may have affect which car you choose to buy this year. As always, refer to your accountant for specific advice on how any tax changes impact your individual circumstances and your business structure.
In the motor vehicle sector, some fees and charges such as car registration and road tolls are state-based and will vary from state to state. But a number of motor vehicle taxes are determined by the Australian Taxation Office (ATO) and apply across all states and may impact private and business car buyers. In particular the Luxury Car Tax, Non-Claimable GST Threshold and Car Cost Depreciation Limit.
Luxury Car Tax
The Luxury Car Tax (LCT) is a tax on imported vehicles with a sale price over a certain threshold. LCT is determined and collected by the ATO with the threshold reviewed annually. Changes to LCT come into effect each year on 1 July in line with the financial year.
LCT is currently charged at 33% on the value of eligible cars. That is, cars with a value above the threshold as set by the ATO and subject to other conditions which determine if a particular vehicle is subject to LCT. It is charge on the GST inclusive value of the car above the current threshold.
The LCT is payable by businesses and non-businesses that import luxury cars and businesses that purchase these cars. So the importer or dealer will actually pay the LCT but it is passed on to the buyer in the overall purchase price.
The tax was first introduced to encourage buyers to support the Australian car manufacturing sector by making imported vehicles significantly more expensive. But as manufacturers continue to exit the Australian car manufacturing sector, some are questioning the relevance of LCT.
But wait - there is good news for luxury car buyers as the ATO has increased the LCT threshold for the financial year 2020/21 (FY21). In FY20 it was $67,525 and for FY21 it is $68,740. For fuel-efficient vehicle buyers the news is even better - in FY20 LCT on eligible cars was $75,526 and for FY21 it is $77,565.
Could be an incentive to purchase a fuel-efficient luxury car. You’ll need to check which cars qualify for the higher threshold. The ATO information that we sourced defines such as vehicles as using less than 7 litres of fuel per 100 klms. Luxury electric vehicles will also be included in this category.
Disappointing for those that are trying to contribute positively to zero emissions. But the EV industry is sure to be lobbying hard on this issue.
When considering which luxury car to purchase, use our Business Car Loan Calculator to compare rough ballpark estimates on repayments.
Other Car Tax Changes
Other changes that come into effect from 1 July are changes include:-
- Car Cost Depreciation Limit which has increased from FY20 $57,581 to FY21 $59,136
- Non-Claimable GST which has increased from $5,234.64 in FY20 to $5,376 in FY21
Keep in mind, the Government has extended the Instant Asset Write-Off deadline to 31 December 2020 as we covered in another blog.
While the LCT will increase the price of some cars, the GST and depreciation changes may only impact certain types of car finance. When discussing your car finance requirements with your Jade Car Loans consultant, we always advise you first consult with your accountant as to which is the preferred finance type – Chattel Mortgage, CHP, Leasing – for your business.
Sourcing Luxury Car Finance
Jade Car Loans provides cost-effective motor vehicle finance for business vehicle purchases and cheap car loans for our private car buyers. When purchasing a luxury vehicle with a significant price tag, sourcing the cheapest car loan deal is major consideration for savvy buyers.
With low interest rates available combined with our ongoing practice of always sourcing the best interest rates and cheap car finance, we are well-placed to source you a very competitive quote for your luxury car finance.
A reminder of the car loan types available through Jade Car Loans:
For a quick quote, give us a call.
For more information on motor vehicle finance browse our library of articles or speak with a Jade Car Loans consultant 1300 000 003
DISCLAIMER: THE INFORMATION PROVIDED IS FOR GENERAL CONSIDERATION. ANY REFERENCE TO OFFICIAL GOVERNMENT POLICIES HAS BEEN SOURCED FROM AUSTRALIAN GOVERNMENT AND STATE GOVERNMENT SOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS IN PRESENTATION OR INTERPRETATION OF THE FACTS AS PROVIDED BY THESE SOURCES. WE ADVISE ALL INDIVIDUALS AND BUSINESSES TO REFER TO THEIR ACCOUNTANT OR FINANCIAL ADVISOR FOR PROFESSIONAL ADVICE SPECIFIC TO THEIR INDIVIDUAL CIRCUMSTANCES.