Understading why luxury car tax doesn’t apply to commercial vehicles

🚚 Understanding Why Luxury Car Tax Doesn’t Apply to Commercial Vehicles

When purchasing high-value vehicles for your business, it’s natural to question whether Luxury Car Tax (LCT) might apply. Fortunately, many commercial vehicles are exempt—a welcome relief for tradespeople, fleet operators, and other business owners. In this article, we’ll break down why LCT doesn’t apply to commercial vehicles, backed by guidance from the ATO.

💼 What is Luxury Car Tax?

LCT is a tax of 33% imposed on the GST-inclusive value of a car that exceeds the luxury car threshold. As of the 2024–25 financial year, the thresholds are:

• $91,387 for fuel-efficient vehicles
• $76,950 for other vehicles

This tax applies in addition to GST and is generally relevant for dealers and importers, although the cost may be passed on to buyers.

🚛 Commercial Vehicles: A Key Exemption

According to the ATO, vehicles not designed for the principal purpose of carrying passengers are not subject to LCT, even if their value exceeds the threshold.

“LCT does not apply to commercial vehicles, such as trucks or vans, that are not designed for carrying passengers.”
— https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/luxury-car-tax/when-lct-doesn-t-applyATO: Luxury car tax

The ATO provides guidance based on factors such as:

• Number of seats vs. load capacity
• Permanent interior fittings (e.g., cargo barriers, shelving)
• Layout and window configurations

If the vehicle is designed more for goods transport than passengers, it may be considered commercial and not subject to LCT.

🧾 Common Examples of LCT-Exempt Vehicles

• Dual cab utes that meet the ATO’s payload criteria
• Panel vans and delivery vans
• Heavy trucks and buses
• Certain 4WDs when clearly configured for work-related load carrying

A helpful guide on whether a vehicle is considered commercial is the payload test: If the vehicle’s payload capacity is more than 1,000 kg, it’s generally considered a commercial vehicle for tax purposes.

✅ What You Should Do

If you’re purchasing vehicles for business use:

• Ensure your vehicle’s primary design purpose is for goods transport
• Consult your accountant to assess LCT liability
• Keep documentation such as manufacturer specs and modifications

We’re here to assist you in navigating LCT obligations and exemptions to ensure your business stays compliant while optimising cash flow.

📩 Have questions about your next vehicle purchase? Get in touch with our team today for personalised tax advice.