Issue
Is the entity making a taxable importation of a luxury car under subsection 7-10(1) of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), when it imports a luxury car which was built overseas from some components and parts that the entity originally acquired in Australia and then exported by the entity?
Decision
Yes, the entity is making a taxable importation under subsection 7-10(1) of the LCT Act when it imports a luxury car that has been built overseas from some components and parts that the entity originally acquired in Australia and then exported.
Facts
The entity acquires a car body shell and associated parts for a car in Australia.
The entity then exports the car body shell and parts to an overseas country where the car is built.
After the car is built, the entity then imports the complete car into Australia for a value that exceeds the luxury car tax threshold.
The car is being imported into Australia for the first time and is commercially distinct to the body shell and parts, which were originally exported.
Customs classify the imported car as a luxury car and impose luxury car tax.
Reasons for Decision
Subsection 7-10(1) of the LCT Act states that you make a taxable importation of a luxury car if the luxury car is imported and entered for home consumption.
Subsection 25-1(1) of the LCT Act defines a luxury car as a car whose value exceeds the luxury car tax threshold.
Subsection 25-1(3) of the LCT Act defines the luxury car tax threshold as the car limit that applies under Subdivision 42-B of the Income Tax Assessment Act (ITAA 1997), for the year in which the supply of the car occurred, or the car was entered for home consumption.
The luxury car is built overseas and is being imported and entered for home consumption in Australia for the first time. The car itself only came into existence once the body shell and parts were put together, and manufacture had taken place. Manufacture has taken place because the car is a different thing to the parts or components from which it is made ( FC of T v Jack Zinader Pty Ltd (1949) 78 CLR 336).
The luxury car has never previously been entered or used in Australia. Therefore, the entity importing the luxury car makes a taxable importation of a luxury car as its value exceeds the luxury car tax threshold.