Luxury Car Tax, explained

It is charged on the excess, not the price

Luxury Car Tax is 33% of the amount above a threshold, worked out on that excess after GST is taken off it. The practical rate is about 30 cents per dollar over the line.

A car $1,000 over the threshold does not owe 33% of its price. It owes about $300.

That shape is the whole thing. Everything below is which line applies, what counts as the price, and who escapes.

There are two lines, and the test for the higher one is not economy

From 1 July 2026:

The fuel-efficient test changed on 1 July 2025, from 7.0 litres per 100km to 3.5. That is the single most expensive out-of-date fact in car buying advice, because 7.0 admitted most ordinary hybrids and 3.5 does not. A conventional hybrid at 5.5 sits on the lower line. A plug-in hybrid at 3.1 clears the higher one, and so does every electric car.

Nearly $11,000 of headroom turns on a figure most buyers read as a fuel claim rather than a tax test.

One caution on a plug-in's number. A rated consumption figure assumes the battery is charged. Where there is no charger at home, the rated figure is not the figure the car will use, though it is still the figure the tax is decided on.

What counts as the price

More than the car. The value the threshold is compared against includes:

• GST
• Dealer delivery
• Warranties bought with the car
• Accessories supplied at the same time as the car

It does not include stamp duty, registration or compulsory third party insurance. Those are charged after, by a state, on a different basis.

So a drive-away price is the wrong number to compare. A drive-away figure already contains duty, registration and CTP, which are not part of the Luxury Car Tax value. A car with a drive-away price of $80,271 can be several thousand dollars under the line on the basis that actually matters, and comparing the two is the commonest error in this subject.

Ask for the list price.

Three ways a car does not pay it

1. It clears the higher line. Rated at or under 3.5 litres per 100km. Every electric car qualifies, and so does a plug-in hybrid at 3.1.

2. It is not a passenger car. A commercial vehicle designed principally to carry goods rather than people is outside the tax at any price. This is how a $90,690 ute pays nothing while an $83,490 family wagon pays. The sum is below.

3. The accessory was genuinely free. Accessories thrown in at no charge are not taxed, because they do not raise the price. Accessories invoiced with the car are taxed, because they do.

That third one is worth money at the counter, and it points the same way as the arithmetic: above the line, take a deal in price rather than in metal. A dollar off the price is worth $1.30. A dollar of accessories on the invoice costs $1.30. The difference between taking $1,000 as a discount and taking it as equipment is $300.

The ute rule, and the sum anyone can run

A ute is a car for this tax. The definition catches anything carrying a load under two tonnes and fewer than nine passengers, which a dual cab does. The income tax definition uses one tonne, and confusing the two is the usual reason somebody says a ute is not a car.

It escapes by a second test instead: whether the vehicle is a commercial vehicle, and one not designed for the principal purpose of carrying passengers. Both halves have to be true.

The legal test is not a percentage. The ATO's determination LCTD 2023/1 says the principal purpose only has to be greater than each of the other design purposes, not more than half of all of them together, and that no percentage needs to be assigned. It is judged on the design against seven factors, and the vehicle's ADR category is expressly not conclusive.

The sum everybody quotes is a compliance appendix, not the test. The determination's appendix says the Commissioner will not spend compliance resources on a utility where:

and the passenger side comes to less than half of the load side.

A dual cab seats five, so its passenger capacity is fixed at 340kg and it needs load capacity above 680kg to pass.

Worked on a Ford Ranger Platinum, from figures Ford publishes: GVM 3,350kg, 2,369kg empty, so load capacity is 981kg against a passenger capacity of 340kg. Half of 981 is 490, so it passes with 150kg to spare.

Two edges on that sum.

Accessories are inside it. The figures are taken as the vehicle is supplied, and anything fitted then raises unladen mass, which shrinks the load side. A Raptor's 753kg of load capacity passes by 73kg, and a canopy weighs more than that.

And it is a safe harbour rather than a verdict. The determination says a vehicle that fails the sum may still be found not principally a passenger carrier. A maker pricing a ute without Luxury Car Tax is applying the exclusion in the law, not working a loophole.

Victoria charges a second time at the same figure

Victoria pegs its luxury stamp duty step to the federal threshold, so $80,809 is a line in two different taxes. A Victorian buyer nudged over it by a colour pays twice for the same inch.

And the same carve-out applies there. Victoria's luxury step is for an "Other passenger car". A new non-passenger vehicle pays $5.40 per $200 at every value, and the State Revenue Office names utilities and dual cab utilities in that class.

So the body style is worth real money twice over. On a $90,690 Raptor:

Together that is about $7,686 on a passenger car and about $2,452 on the ute: $5,234 of the price is tax it does not pay because of its shape.

A third Victorian class is worth knowing beside those two: a green passenger car emitting 120g/km of CO2 or less pays $8.40 per $200 at all values, which escapes the luxury step as well.

What to do about it

• Ask for the list price, not a drive-away figure, before comparing anything to a threshold.
• Check the rated consumption against 3.5, not against 7.0.
• Above the line, take the deal in price. A dollar off is worth $1.30.
• Get the figure in writing before choosing a colour, because on a variant sitting within a few hundred dollars of a line, an option decides it.
• On a ute, read the body classification rather than the price.

Where this applies on this site

• Ford Ranger 2026.50MY, where the Platinum lists at $80,890, which is $81 over the line, and pays nothing.
• Tesla Model Y 2026, where the Performance has a vehicle subtotal of $86,700, above the ordinary line and below the fuel-efficient one.