Quick answer
Luxury car tax is a 33% tax on the amount by which a car's LCT value exceeds the threshold. For 2026–27 the thresholds are $80,809 for most cars and $91,661 for fuel-efficient vehicles. The dealer works it out using the ATO formula, pays it on its BAS and builds it into your price, so it usually ends up inside the amount you finance.
Key points
- LCT rate: 33% of the GST-exclusive amount above the threshold.
- 2026–27 thresholds: $80,809 (other) and $91,661 (fuel-efficient).
- 2025–26 thresholds: $80,567 and $91,387.
- The seller pays LCT and passes it on in the price.
- LCT rate
- 33%
- Threshold 2026–27 (other)
- $80,809
- Threshold 2026–27 (fuel-efficient)
- $91,661
- Who pays the ATO
- The seller or importer
What is luxury car tax?
Luxury car tax (LCT) is a federal tax on cars with a value above a set threshold. It’s not paid separately by you as the buyer; the dealer or importer works it out, pays it to the ATO through its BAS, and includes it in the price. So for a business buying an expensive car, LCT is simply part of the cost — and usually part of what you finance.
The thresholds
| Financial year | Fuel-efficient vehicles | Other vehicles |
|---|---|---|
| 2024–25 | $91,387 | $80,567 |
| 2025–26 | $91,387 | $80,567 |
| 2026–27 | $91,661 | $80,809 |
Source: ATO. The ATO notes that the definition of a fuel-efficient vehicle changed from 1 July 2025 under the Treasury Laws Amendment Act 2025, so check whether the specific car qualifies for the higher threshold.
The formula
The ATO’s formula for working out LCT on a sale is:
(LCT value − LCT threshold) × 10 ÷ 11 × 33%
Step by step:
- Take the car’s LCT value (broadly, the GST-inclusive price including most options, but excluding some costs like registration).
- Subtract the threshold that applies.
- Multiply by 10/11 to take the GST out of the excess.
- Multiply by 33%.
Illustrative calculation
Illustrative only — use the dealer’s figures for a real purchase. Suppose a car has an LCT value $11,000 above the “other vehicles” threshold.
- Excess: $11,000
- Remove GST: $11,000 × 10 ÷ 11 = $10,000
- Apply 33%: $10,000 × 33% = $3,300 of LCT
That $3,300 is included in the drive-away price.
How LCT interacts with other vehicle taxes
| Rule | Who it affects | Effect |
|---|---|---|
| Luxury car tax | Built into the price of cars above the threshold | Raises the purchase price |
| Car limit | Business buyer’s tax claims | Caps depreciation and the GST credit |
| GST | GST-registered buyer | Credit capped at one-eleventh of the car limit for passenger cars |
| FBT | Employers providing cars | Applies to private use by employees |
For a car well above the LCT threshold, a business pays LCT in the price, can only claim a capped GST credit, can only depreciate up to the car limit, and may face FBT if an employee uses it privately. That’s why expensive cars deliver less tax benefit than many people expect.
Electric vehicles and LCT
The higher threshold for fuel-efficient vehicles matters for EVs in two ways. First, many EVs fall under the fuel-efficient definition, so LCT starts at a higher price. Second, the FBT electric car exemption only applies where the car’s value is below the fuel-efficient LCT threshold at first retail sale. See electric vehicle finance.
Is LCT included in the finance?
Generally yes. Because LCT is built into the price the dealer charges, the amount you finance usually includes it. Lenders assess the whole price, so a car with significant LCT needs to be comfortably affordable for the business. A deposit or trade-in is common on higher-value cars.
Questions to ask the dealer
- What is the LCT value of this car, and which threshold applies?
- Does this model meet the current fuel-efficient definition?
- How much LCT is included in the drive-away price?
- Which options and accessories are included in the LCT value?
Illustrative example: a consultancy choosing between two cars
Illustrative only. A consultancy is choosing a car for its managing director. Option one is priced above the “other vehicles” LCT threshold; option two is a fuel-efficient model priced below the fuel-efficient threshold. After the accountant factors in LCT, the capped GST credit, the car limit and FBT, the second option costs the business noticeably less over the term. The company chooses it and finances it through a chattel mortgage.
Common LCT misunderstandings
- “LCT only applies to sports cars.” It applies to any car whose LCT value exceeds the threshold, including large SUVs and well-optioned family cars.
- “Options aren’t counted.” Most options and accessories fitted before delivery are included in the LCT value.
- “Electric cars don’t pay LCT.” They can, if their value exceeds the fuel-efficient threshold that applies.
- “My business can claim it back.” For most business buyers, LCT is simply part of the vehicle’s cost.
Planning around the thresholds
If you’re close to a threshold, small choices matter. Removing an option package or choosing a different trim might bring a car below the threshold and remove LCT altogether. Ask the dealer to show you the LCT value of each option combination before you sign.
LCT on used cars
LCT is generally a tax on the supply of a new car by a dealer or importer, but some sales of used luxury cars by dealers can also involve LCT. If you’re buying a late-model prestige car from a dealer, ask whether LCT applies to that sale. Private sales between individuals don’t involve LCT being charged.
Financing the LCT component
Because LCT is part of the price, it’s part of the amount a lender assesses. A car carrying a large LCT component costs more to finance and gives no extra tax benefit, which is one more reason to compare models carefully before you sign.
Financing a higher-value car
If you’re buying a car that may attract LCT, our prestige car finance page covers what lenders look for. When you’re ready, start a quick enquiry.
There’s no credit check to ask. Your details aren’t handed out to a stack of lenders; one specialist reviews them and calls you. Accurate details about the car, its price and how it’ll be used help us find a lender comfortable with the vehicle. Check your options.
Frequently asked questions
How is luxury car tax calculated?
The ATO formula for a sale is: (LCT value − LCT threshold) × 10 ÷ 11 × 33%. The 10/11 step removes GST from the amount above the threshold before the 33% rate applies.
Do utes attract luxury car tax?
LCT applies to cars as defined for LCT purposes, which broadly covers vehicles designed to carry fewer than nine passengers and less than two tonnes. Many work utes are below the thresholds anyway. Ask your dealer or accountant about a specific model.
What is a fuel-efficient car for LCT?
The ATO sets the definition, and it changed from 1 July 2025. Ask the dealer whether the specific model qualifies for the higher threshold.
Can my business claim back luxury car tax?
In limited situations, such as some vehicles bought for specific exempt purposes, there are adjustments. For most business buyers, LCT is simply part of the cost. Your accountant can confirm whether any exception applies.