Issue
Does the entity, a car dealer, include the cost of a roof rack in calculating the 'luxury car tax value' as defined in section 5-20 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), where the entity arranged for the roof rack to be fitted to the luxury car before its delivery to the customer?
Decision
Yes, the entity does include the cost of a roof rack in calculating the 'luxury car tax value' as defined in section 5-20 of the LCT Act, where the entity arranged for the roof rack to be fitted to the luxury car before its delivery to the customer.
Facts
The entity is a car dealer. The entity sells a luxury car. The customer is not entitled to quote for the supply of the luxury car (see note for explanation). The sale is a taxable supply of a luxury car under section 5-10 of the LCT Act.
The customer requests that a roof rack be fitted to the luxury car before delivery. The roof rack is an optional extra and is only fitted to the car at the request of the customer. The entity arranges for the roof rack to be supplied and fitted by a third party. The customer pays the third party directly for the roof rack. The customer picks the car up from the entity after the roof rack has been fitted by the third party.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Section 5-20 of the LCT Act defines the 'luxury car tax value' of a car. Subsection 5-20(1) of the LCT Act provides that the luxury car tax value is the price of the car excluding: • any luxury car tax for that supply; and • any other Australian tax, fee or charge, other than GST and customs duty payable on the supply of the car.
Further, subsection 5-20(3) of the LCT Act provides that the luxury car tax value of a car includes the price of all supplies in relation to the car that are made to, or are paid for by, the recipient of the car and that are: • made before the end supply of the car; or • made under an arrangement with the supplier of the car, or with an associate of the supplier, at or before the time of the end supply of the car.
Section 27-1 of the LCT Act defines 'end supply' of a car to mean a supply of a car to a recipient who is not entitled to quote in relation to that supply.
As the customer is not entitled to quote for LCT purposes, the end supply of a car occurs when the car is delivered to the customer. Therefore, the end supply of the luxury car in question occurs when the car is delivered to the entity's customer.
The entity was instructed by the customer to arrange for the supply and fit of the roof rack to the luxury car before delivery. Therefore, the supply of the roof rack is a supply made in relation to the car before the entity delivers the car to its customer. As such, the costs associated with the supply of the roof rack and its installation are included in the 'luxury car tax value' according to subsection 5-20(3) of the LCT Act. [Note: In certain circumstances, a recipient entity can quote their Australian Business Number (ABN) in the prescribed form for a supply or importation of a luxury car and not pay luxury car tax. This is designed to avoid luxury car tax becoming payable until the car is sold or imported at the retail level. Division 9 of the LCT Act sets out who is entitled to quote and the manner in which it is to be done.]