Luxury Car Tax and racing cars

Is the entity, a motor vehicle dealer, making a taxable supply of a luxury car under subsection 5-10(1) of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), when it sells a racing car that is designed for use only on a racetrack?

No, the entity is not making a taxable supply of a luxury car under subsection 5-10(1) of the LCT Act when it sells a racing car that is designed for use only on a racetrack.

The entity is a motor vehicle dealer that is registered for goods and services tax (GST). The entity sells a racing car. The sale of the racing car is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 .

The racing car is designed for use only on racetracks and cannot be used on public roads in any country in the world. The racing car is motor powered and designed to carry a load of less than two tonnes and fewer than nine passengers.

Section 5-10 of the LCT Act sets out the requirements that must be met for an entity to make a taxable supply of a luxury car. The first requirement is that the entity must supply a 'luxury car' (paragraph 5-10(1)(a) of the LCT Act).

A 'luxury car' is defined by subsection 25-1(1) of the LCT Act as 'a car whose luxury car tax value exceeds the luxury car tax threshold.'

'Car' is defined in section 27-1 of the LCT Act as a: motor vehicle (except a motor cycle or similar vehicle) that is designed to carry a load of less than 2 tonnes and fewer than 9 passengers or a limousine (regardless of the number of passengers it is designed to carry).

'Motor vehicle' is also defined in section 27-1 of the LCT Act as 'a motor powered road vehicle (including a 4 wheel drive vehicle)'. The term 'road vehicle' is not defined in the LCT Act.

Neither The Macquarie Dictionary 1997 3rd edn, The Macquarie Library Pty Ltd, New South Wales nor The Australian Concise Oxford Dictionary, 1997, 3rd edn, Oxford University Press, South Melbourne define the term 'road vehicle'.

Guidance on the meaning of the term 'road vehicle' can be found in the Motor Vehicle Standards Act 1989 (the object of which is to achieve uniform vehicle standards to apply to road vehicles used for transport in Australia).

Section 5 of the Motor Vehicle Standards Act defines a 'road vehicle' to mean a road motor vehicle, a road trailer or a partly completed road vehicle. Section 5 of the Motor Vehicle Standards Act further defines the term 'road motor vehicle' as: • a motor vehicle designed solely or principally for the transport on public roads of people, animals or goods, or • a motor vehicle that is permitted to be used on public roads.

Additionally, in Sales Tax Ruling SST 13 the Commissioner considered the meaning of 'road vehicle' for the purposes of the sales tax legislation. Paragraph 3.2 of SST 13 states: The term 'road vehicle' refers to the class of vehicle, not to the actual use to which a particular vehicle may be put. It is a road vehicle if it is in a class of vehicle that is designed for use on public roads and it would be a road vehicle even thought it may never be used or registered for use on public roads.

Having considered these definitions, for the purposes of the LCT Act a road vehicle is a vehicle that is designed for use on public roads. The term 'public roads' is not restricted to public roads in Australia. It includes public roads in any country in the world.

The racing car is not designed for use on public roads in any country in the world. It is designed to be used only on a racetrack. The racing car is not a road vehicle for the purposes of the LCT Act and therefore, it is not a luxury car.

As the requirement in paragraph 5-10(1)(a) of the LCT Act is not met, the entity is not making a taxable supply of a luxury car under subsection 5-10(1) of the LCT Act when it sells a racing car that is designed for use only on a racetrack.