So, you’ve finally decided to treat yourself to that shiny new BMW, Audi, or Tesla. Good on you! But before you step into the dealership, there’s one thing you absolutely need to know about: Luxury Car Tax in Australia (LCT). It might not sound glamorous, but understanding it can save you thousands of dollars—or a major headache.
In this article, we’ll break down everything in simple terms. No jargon, no legalese—just clear, straightforward advice that helps you feel confident and in control.
What is Luxury Car Tax (LCT)?
In Australia, Luxury Car Tax is a tax applied to cars that exceed a certain value. It was introduced to ensure that higher-end vehicle owners contribute a bit more to government revenue.
If the value of your car exceeds the LCT threshold, you’ll need to pay 33% on the amount above the threshold.
According to the Australian Taxation Office (ATO), for the 2024–25 financial year:
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The LCT threshold for fuel-efficient cars is $89,332.
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For other cars, the threshold is $76,950.
If you’re buying anything above that, congratulations—but also, prepare your wallet!
How Does Luxury Car Tax Actually Work?
Let’s make it real with a quick story.
Anecdote Time
Lisa, a small business owner from Sydney, decided to reward herself with a beautiful new Mercedes-Benz priced at $100,000. But when she saw the invoice, she was shocked to find it had shot up by several thousand dollars.
Why? Luxury Car Tax.
Here’s how it worked for Lisa:
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Her Mercedes-Benz wasn’t fuel-efficient.
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It cost $100,000 (GST-inclusive).
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The threshold for non-fuel-efficient cars was $76,950.
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The amount over the threshold: $100,000 – $76,950 = $23,050.
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LCT Payable = 33% of $23,050 = $7,606.50.
That’s $7,600 she didn’t expect to pay. Ouch!
Step-by-Step: How to Calculate Your LCT
You don’t need to be a math whiz. Here’s a quick and easy way to work out Luxury Car Tax in Australia:
Step 1: Check the car’s GST-inclusive value
Make sure you include optional extras, accessories, and dealer delivery charges (but not registration, stamp duty, or insurance).
Step 2: Determine the correct LCT threshold
Is your car fuel-efficient (uses ≤ 7.0L per 100km)? If yes, the higher threshold applies.
Step 3: Subtract the threshold from the car’s value
This gives you the LCT taxable amount.
Step 4: Multiply the taxable amount by 33%
That’s your Luxury Car Tax.
You can also use this ATO LCT calculator to make things easier.
Who Pays the LCT?
In most cases, car dealerships are responsible for collecting and paying the LCT to the ATO. However, if you’re importing a car, the story changes. You may need to pay it yourself as part of your import duties.
Also, businesses buying luxury vehicles (even for commercial use) may be hit with LCT. That’s why it’s essential to work with a reliable accountant or tax agent.
Can You Avoid or Reduce LCT?
Great question. The answer? Sometimes.
Here are a few smart ways to minimise or legally avoid Luxury Car Tax:
✅ Buy a fuel-efficient car
Since the threshold is higher, fewer cars are subject to LCT. Think hybrid, electric, or plug-in hybrid vehicles.
✅ Consider second-hand cars
If the car has already had LCT paid once, you don’t need to pay it again unless you’re importing it.
✅ Use a novated lease or salary packaging
These options can sometimes help reduce the GST component, potentially lowering LCT costs. Talk to an accountant for tailored advice.
Why Talk to a Professional?
LCT can get complicated, especially if you’re a business owner or considering importing a vehicle. The last thing you want is to end up overpaying—or worse, underpaying and getting hit with fines.
That’s where Perfect Accounting PTY Ltd comes in. Their experienced team of Accounting Agents has helped countless Australians navigate the maze of taxes—including Luxury Car Tax—with confidence and clarity.
Whether you’re:
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Buying a car personally
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Running a fleet for your company
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Importing a luxury model
They’ll give you precise, easy-to-understand advice—and help you legally minimise your tax burden.
Visit Perfect Accounting today to get started.
Quick FAQs About LCT
❓ Is LCT charged on electric cars?
Yes—but only if their value is above the fuel-efficient car threshold. However, electric vehicles often qualify for state-level incentives, which may reduce your overall cost.
❓ Can I claim LCT as a tax deduction?
If you’re buying a vehicle for business use, the LCT amount can usually be factored into your depreciation or operating cost deductions.
❓ Is LCT applied to used cars?
Only if the car is being imported or hasn’t had LCT paid before. Always check the vehicle history and compliance documentation.
Final Thoughts
Buying a luxury car should be an exciting milestone—not a stressful financial mystery.
So before you rev up that engine, make sure you understand how Luxury Car Tax in Australia affects your budget. Better yet, chat with a trusted accounting expert like Perfect Accounting PTY Ltd to take the guesswork out of the equation.
They’ll help you drive away with peace of mind—and without any nasty tax surprises.
Ready to buy your dream car without the drama? Contact Perfect Accounting PTY Ltd today.
