How to Calculate Luxury Car Tax on Your Vehicle Purchase in Australia

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What Is Luxury Car Tax and Who Pays It?

Luxury Car Tax (LCT) is a federal tax applied to cars sold or imported into Australia that exceed a set threshold in value. The tax was originally introduced alongside the Goods and Services Tax (GST) to help protect the local car manufacturing industry. Even though Australian car manufacturing has ended, LCT remains a key part of the tax system for vehicle purchases.

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Who pays LCT?

Car dealerships selling or importing luxury cars must pay LCT and usually pass this cost on to the buyer.
Individuals who import luxury cars for personal use must also pay LCT when the car arrives in Australia.

Understanding the LCT Thresholds

The Australian Taxation Office (ATO) sets two annual thresholds for LCT: one for fuel-efficient vehicles and another for all other vehicles. These thresholds are reviewed each financial year and may be adjusted based on economic factors.

Current LCT Thresholds (2025–26)

Vehicle Type	LCT Threshold (GST-inclusive)
Fuel-efficient vehicles	$91,387
Other vehicles	$80,567

What counts as a fuel-efficient vehicle?

From 1 July 2025, only vehicles with an advertised combined fuel consumption of less than 3.5 litres per 100 kilometres qualify as fuel-efficient for LCT purposes. This is a significant change from previous years, when vehicles using 7 litres or less per 100 kilometres were eligible for the higher threshold.

What Is Included in the LCT Value?

When calculating Luxury Car Tax on your vehicle purchase in Australia, it’s important to know which costs are included in the LCT value and which are not.

Included in LCT value:

Retail price of the car
GST
Customs duty
Dealer delivery charges
Standard and statutory warranties
Accessories, modifications, and treatments fitted before delivery or under an arrangement with the supplier

Not included in LCT value:

LCT itself
Other Australian taxes, fees, or charges (such as stamp duty, transfer fees, registration)
Compulsory Third-Party Insurance (CTPI)
Extended warranties
Financing costs
Service plans

How to Calculate Luxury Car Tax

Calculating Luxury Car Tax on your vehicle purchase in Australia is straightforward once you know the formula and what to include.

Step-by-Step Calculation

Determine the LCT value of the car
This is the GST-inclusive price, including the costs listed above.
Check the applicable LCT threshold
Is your car fuel-efficient (less than 3.5L/100km from 1 July 2025) or not?
Subtract the threshold from the LCT value
This gives you the amount above the threshold.
Calculate the GST-exclusive portion
Multiply the excess amount by 10/11 to remove the GST component.
Apply the LCT rate (33%)
Multiply the GST-exclusive amount by 0.33 to find the LCT payable.

Example Calculation

Let’s say you’re buying a fuel-efficient car with a GST-inclusive price of $105,000.

Excess over threshold:
$105,000 – $91,387 = $13,613
GST-exclusive amount:
$13,613 × (10/11) = $12,375.45
LCT payable:
$12,375.45 × 0.33 = $4,083.90

You would pay approximately $4,083.90 in Luxury Car Tax on this vehicle.

When Is Luxury Car Tax Paid?

LCT is paid at the time of sale or import:

Businesses (car dealers, importers) report and pay LCT through their Business Activity Statement (BAS).
Individuals importing a car for personal use pay LCT when the car arrives in Australia.

Exemptions and Concessions

There are several situations where LCT does not apply. Here are the main exemptions:

Cars over two years old
LCT only applies to cars under two years old when sold or imported.
Exports
Vehicles exported as GST-free exports are exempt.
Emergency vehicles
Ambulances, fire trucks, police cars, and search and rescue vehicles are exempt.
Motorhomes and campervans
Commercial vehicles
Vehicles primarily designed to carry goods, not passengers.
Modifications for people with disabilities
Public institutions
Museums, galleries, or libraries importing or selling cars for public display.

Practical Tips and Strategies

1. Consider the age of the vehicle
Buying a car that is more than two years old is a simple way to avoid LCT.

2. Check fuel efficiency
If you’re considering a fuel-efficient vehicle, ensure it meets the new, stricter criteria (less than 3.5L/100km from 1 July 2025) to qualify for the higher threshold.

3. Review additional costs
Be aware of which costs are included in the LCT value and which are not. This can help you negotiate the final price with the dealer.

4. Examine exemptions
If you qualify for any exemptions (such as for commercial use or disability modifications), make sure to provide the necessary documentation to the seller or importer.

5. Use online calculators
Many websites offer LCT calculators to help you estimate the tax before you buy.

Keeping Records

If you’re a business or individual required to pay LCT, it’s important to keep detailed records. This includes:

Invoices and receipts
Importation documents
Written statements from previous owners or suppliers about previously paid LCT

Good record-keeping will help you stay compliant with the Australian Taxation Office and make it easier to claim refunds or adjustments if needed.

Common Questions

Does LCT apply to used cars?
LCT only applies to new or near-new cars (under two years old) when sold or imported.
Can I claim back LCT?
Businesses in certain industries (such as primary production or tourism) may be eligible for LCT refunds if they use the vehicle for work purposes.
Are there state-based luxury car taxes?
Some states impose additional taxes or stamp duty on luxury vehicles. Be sure to check local regulations if you live in these states.

Conclusion

Calculating Luxury Car Tax (LCT) on your vehicle purchase in Australia does not need to be confusing. By understanding the current luxury car threshold, knowing which costs are included, and using the straightforward formula, you can work out exactly how much luxury car tax you might owe. The luxury car tax rate is applied to vehicle purchases above the set threshold, and this threshold is reviewed each year to keep up with changes in the market and the consumer price index.

While the Australian car manufacturing industry is no longer as prominent as it once was, the luxury car tax Australia system remains important for buyers of new or near-new luxury cars, as well as some imported vehicles. The Australian Automotive Dealer Association regularly offers guidance to both buyers and dealers on how to pay luxury car tax and stay compliant with the rules, especially as more fuel efficient vehicles now qualify for a higher threshold.

Choosing a car with lower fuel consumption can help reduce the amount of LCT you need to pay, and it’s always wise to check for any exemptions that might apply to your situation. Keeping thorough records will help ensure you meet all requirements set by the Australian Taxation Office. If you have any questions about luxury car tax or need personalised advice, our team at ACT Tax Group is ready to help make your next vehicle purchase as smooth and stress-free as possible.