As a business owner, understanding the various car tax thresholds is crucial for managing expenses and maximising deductions.
Starting from July 1, 2023, new thresholds come into play for business motor vehicles, goods and services tax (GST), and luxury car tax (LCT). In this blog, we’ll break down the key details and implications of these thresholds, helping you stay informed and make informed decisions about your business vehicles.
For the 2023-24 financial year, the car limit is set at $68,108. This figure represents the maximum value used to calculate depreciation on a car first used or leased during this period. As a business owner, you can claim tax deductions for expenses related to motor vehicles used for business purposes. However, it’s essential to accurately determine the percentage of business use and exclude any private use when making claims.
Goods and Services Tax (GST)
When purchasing a car, if the price exceeds the car limit, the maximum GST credit you can claim is one-eleventh of the car limit, amounting to $6,191 in 2023-24. It’s important to note that luxury car tax (LCT) payments cannot be claimed as GST credits, regardless of the extent of business use. We’ll delve deeper into LCT in the next section.
Luxury Car Tax (LCT)
For fuel-efficient vehicles, the LCT threshold is set at $89,332, reflecting an increase in the motor-vehicle purchase sub-group of the Consumer Price Index (CPI). On the other hand, for all other luxury vehicles, the threshold stands at $76,950, aligning with the increase in the ‘All Groups’ CPI. LCT applies to businesses registered for GST when selling or importing luxury cars. Cars exceeding the LCT threshold attract an LCT rate of 33%.
To calculate the payable LCT amount for car sales, you can use the following formula: (LCT value – LCT threshold) × 10 ÷ 11 × 33%.
The LCT value encompasses the retail price of the car, including GST, customs duty, dealer delivery charges, warranties, accessories, and other incentives. However, it excludes other taxes, fees, insurance, financing costs, and service plans. LCT already paid can reduce the overall LCT amount.
Reference: ATO webite
Understanding the car tax thresholds for the 2023-24 financial year is crucial for business owners who utilise vehicles in their operations. By staying informed about income tax, GST, and LCT requirements, you can effectively manage expenses, claim deductions accurately, and make well-informed decisions regarding your business vehicles. Ensure you comply with the latest thresholds and report any applicable taxes accordingly.
Remember, consulting with a tax professional or accountant is advisable to navigate the complexities of car tax thresholds and ensure compliance with regulatory requirements. Stay updated, make informed decisions, and drive your business forward with confidence!
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.