Issue
Is the entity, a motor vehicle dealer, making a taxable supply of a luxury car under section 5-10 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), when it sells a commercial vehicle that is a utility with a load carrying capacity of 550kg and is designed to carry two passengers?
Decision
No, the entity is not making a taxable supply of a luxury car under section 5-10 of the LCT Act when it sells a commercial vehicle that is a utility with a load carrying capacity of 550kg and is designed to carry two passengers.
Facts
The entity is a motor vehicle dealer. The entity is selling a commercial vehicle that is a utility with a load carrying capacity of 550kg and falls within the definition of a car as provided in section 27-1 of the LCT Act.
The selling price of the commercial vehicle exceeds the luxury car tax threshold.
The commercial vehicle has been designed with the dual purpose of transporting goods and carrying passengers. The commercial vehicle is designed to seat a driver and one passenger.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Under subsection 5-10(1) of the LCT Act, an entity makes a taxable supply of a luxury car if: • it supplies a luxury car • the supply is made in the course or furtherance of an enterprise that it carries on • the supply is connected with Australia, and • the entity is registered, or required to be registered for GST.
Subsection 25-1(1) of the LCT Act provides that a luxury car is a car whose luxury car tax value exceeds the luxury car tax threshold. However, paragraph 25-1(2)(c) of the LCT Act provides that a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purpose of carrying passengers.
The entity is selling a commercial vehicle for a price that exceeds the luxury car tax threshold. The commercial vehicle has a load carrying capacity of 550kg and it has been designed with the dual purpose of transporting goods and carrying passengers.
Where a vehicle with a load carrying capacity of less than two tonnes has a dual purpose design, the vehicle will be 'designed principally for carrying passengers' if the majority of its designed load capacity is attributable to passenger carrying capacity.
The passenger carrying capacity is determined by multiplying the designed seating capacity (including the driver's) by 68kg, which is the figure adopted for the purposes of the application of the Australian Design Rules. Where the determined total passenger weight exceeds the remaining load capacity, the vehicle is treated as being designed for the principal purpose of carrying passengers.
The entity's commercial vehicle is designed to seat a driver and one passenger. As the commercial vehicle is designed to carry two passengers, the total passenger carrying capacity is 136kg (68kg x 2) and the remaining load capacity is 414kg.
As the majority of the designed load capacity of the commercial vehicle is not attributable to its passenger carrying capacity, the vehicle is not principally designed for the purpose of carrying passengers. As such, the commercial vehicle is excluded from being a luxury car by paragraph 25-1(2)(c) of the LCT Act.
Therefore, the entity is not making a taxable supply of a luxury car under section 5-10 of the LCT Act when it sells a commercial vehicle that is a utility with a load carrying capacity of 550kg and is designed to carry two passengers.