If the car you are pricing costs more than about $80,000, part of the drive-away figure may be luxury car tax. It is built into the dealer's price, so it is easy to miss when you compare quotes, and it ends up in the amount you finance.
This article is for salaried buyers with a clean credit history and established business owners who are pricing a premium car. It sets out the 2026-27 thresholds, shows how the tax is worked out on a real price and explains what a business can and cannot claim back. The ATO pages linked below were checked on 13 November 2026.
The luxury car tax thresholds for 2026-27
The ATO's luxury car tax rate and thresholds page lists these thresholds for the 2026-27 financial year:
- Fuel-efficient vehicles: $91,661 (up from $91,387 in 2025-26).
- Other vehicles: $80,809 (up from $80,567 in 2025-26).
- Rate: 33% on the amount above the threshold.
The threshold that applies is the one for the financial year the car is imported, acquired or sold. From 1 July 2025, a car generally only counts as fuel efficient if its combined fuel consumption rating is no more than 3.5 litres per 100 kilometres. The old test was 7 litres, and it still applies in a narrow transitional case for cars supplied and used before that date. Check the official combined rating of the exact model, not the brochure's description of it.
How luxury car tax is worked out on a dealer price
The tax is paid by the business that sells the car, usually the dealer, which passes it on in the price. The ATO's formula for a sale is:
(LCT value minus LCT threshold) x 10 / 11 x 33%
In practice that is 30% of the amount by which the LCT value is over the threshold. The LCT value is the retail price including GST, dealer delivery, standard warranties and accessories, modifications or treatments added before delivery or under an arrangement with the dealer. It does not include stamp duty, registration, compulsory third-party insurance, extended warranties, service plans or the costs of financing the car.
The ATO's own example: a car that is not fuel efficient, priced at $88,000 including GST in 2026-27, attracts $2,157.30 of luxury car tax, so the customer pays $90,157.30 before stamp duty, registration and other charges.
Worked example: what the tax adds to a car loan
Our own calculation, for illustration only. It applies the ATO formula to a car that is not fuel efficient, then assumes the whole price is financed over five years at an illustrative 8.50% p.a. with monthly repayments and no fees. Your rate, term and deposit will differ.
- LCT value of $85,000: luxury car tax of $1,257.30, which adds about $25.80 a month to the repayment.
- LCT value of $95,000: luxury car tax of $4,257.30, about $87.35 a month, or roughly $5,240.70 over the five years.
- LCT value of $110,000: luxury car tax of $8,757.30, about $179.67 a month.
- Dealer-fitted options: on a car already over the threshold, $3,000 of accessories added before delivery adds another $900 of tax.
If the $95,000 car qualified as fuel efficient, the higher $91,661 threshold would apply and the tax would be $1,001.70. These figures show why it pays to ask each dealer for the LCT amount on its own line, and to decide which accessories you really want before you sign.
When luxury car tax does not apply
The ATO lists cases where the tax does not apply. The ones most relevant to buyers are:
- Commercial vehicles designed mainly to carry goods rather than passengers, and motor homes or campervans. The ATO's definition of a car for this tax is a road vehicle designed to carry a load of less than 2 tonnes and fewer than 9 passengers.
- Older cars: a car that was not imported and was manufactured more than 2 years before the sale, or a car imported more than 2 years before the sale.
- Modifications for people with a disability. The tax still applies to the car itself.
- Tax already paid: LCT is not charged again on value it has already been paid on.
Whether a dual-cab ute counts as a commercial vehicle depends on whether it is designed mainly to carry goods, which the ATO assesses by the vehicle's principal purpose. Ask the dealer how the tax has been treated on the exact model and check the invoice.
What a business can and cannot claim back
If your business is registered for GST and buys a car above these figures, the ATO's 2026-27 car thresholds update and its guide to purchasing a motor vehicle set three limits:
- GST credit: where the price is over the car limit of $69,883, the GST credit is generally capped at one-eleventh of that limit, which is $6,353, even for a fuel-efficient car and even at 100% business use.
- Luxury car tax: you cannot claim a credit for the LCT you pay, however much you use the car for business.
- Depreciation: the car limit of $69,883 is the most you can use to work out depreciation on a car first used or leased in 2026-27.
Using our $95,000 example at 100% business use, the price includes about $8,636.36 of GST, so roughly $2,283.36 of that GST plus the $4,257.30 of luxury car tax is not claimable. The ATO also says that if you lease a car, the GST credit on each lease payment is not limited to one-eleventh of the car limit, which is one reason to compare the structure as well as the rate. Our guides to chattel mortgages and FBT on a company car in 2026-27 cover the other parts of that decision.
Primary producers and tourism operators registered for GST may be able to claim a refund of luxury car tax on an eligible four-wheel or all-wheel drive, up to $10,000 per vehicle, with a limit of one vehicle a year for primary producers. The claim is made on a separate ATO form, not on the BAS.
Checklist before you sign
- Ask for the LCT on its own line in each written quote, along with the GST-inclusive price, dealer delivery and accessories.
- Confirm the fuel efficiency status from the vehicle's official combined rating if you expect the higher threshold to apply.
- Settle accessories before delivery. Options fitted before delivery, or under an arrangement with the dealer, count toward the LCT value.
- Compare loans on the same amount. Use the full financed amount, including the tax, the comparison rate and fees. Our guide to prestige car finance covers comparing the vehicle, valuation and loan together.
- Decide on the deposit and cash reserve. Paying part of the price, including the tax, from savings reduces the interest on it. Our guide to luxury car finance, deposits and cash reserves works through that trade-off.
- For a business purchase, confirm the GST credit, depreciation and FBT position with your accountant before you choose between a loan and a lease.
The bottom line
For 2026-27, luxury car tax applies above $80,809, or $91,661 for a car rated at no more than 3.5 litres per 100 kilometres. It works out to 30% of the excess, it is not claimable as a business credit, and on a $95,000 car it adds about $4,257 to the price you finance. Once you have a written quote with every component shown, explore car loan options, look at business equipment finance for a business purchase, or test repayments with our calculators.
The thresholds, rates and rules above are the ATO's published information, checked on 13 November 2026. Our calculations are labelled and rely on the stated assumptions. This article is general information only and is not financial or tax advice.
