Global Daily Tax News, Australia Guides On Luxury Car Tax Amendments, (Apr 21, 2025)

The Australian Taxation Office has updated its guidance to reflect amendments to the A New Tax System (Luxury Car Tax) Act 1999, in the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, enacted last month.

The legislation provides for changes to the taxation of luxury cars that will take effect from July 1, 2025. In particular, the definition of a fuel-efficient vehicle will change, and the indexation rates applying to the thresholds for fuel-efficient vehicles and other vehicles will be aligned.

From July 1, 2025, a fuel-efficient car is defined as a vehicle that has a fuel consumption that does not exceed 3.5 litres per 100 kilometres as a combined rating under the vehicle standards in force under Section 12 of the Road Vehicle Standards Act 2018.

Prior to July 1, 2025, a fuel-efficient car was defined as a vehicle with a fuel consumption that doesn't exceed seven litres per 100 kilometres.

However, the pre-July 1 definition will apply to a car, if, before July 1, 2025:

• an entity made a supply or importation of the car; and

• the car was used in Australia for a purpose other than a purpose mentioned in subsection 9-5(1) of the LCT Act.