Australia’s Luxury Car Tax (LCT) is a federal tax of 33 percent that applies to the portion of a vehicle’s value over a certain government-set threshold.
On this page we’ll explore some of the key things to consider regarding LCT and how it affects the vehicle you are thinking of purchasing or leasing through salary sacrifice. In this article we’ll cover LCT thresholds, calculating LCT, EV threshold planning, used cars, exemptions and any potential future policy changes.
Key Points for Buyers
The Luxury Car Tax currently has two key thresholds for the 2026-2027 financial year, which is $91,661 for fuel efficient vehicles such as electric and hybrid cars, and $80,809 for all other vehicles.
LCT is payable on the amount a vehicle’s purchase price (which includes any optional extras such as accessories fitted at the time of purchase) exceeds the threshold within the two categories.
As part of the Australian government’s program to support electric vehicle (EV) uptake, EVs are also exempt from the Fringe Benefit Tax (FBT) when financed through a novated lease.
To find out more about the FBT exemption on select EVs though novated leasing, click here.
What Luxury Car Tax Means for Australian Car Buyers
It’s important to note that LCT is a separate tax on certain vehicles above a threshold and differs from GST, stamp duty, registration and finance costs that can be attributable to all vehicles at the time of purchase.
Typically, LCT is factored into the final purchase price of the vehicle by the seller or importer, rather than appearing as a separate cost or line item in the contract of sale.
2026-27 Luxury Car Tax Thresholds
As we’ve covered, in the 2026-2027 Financial Year there are two LCT thresholds identified by the Australian Taxation Office (ATO):
| Vehicle Type | 2026–27 LCT Threshold | What It Means |
|---|---|---|
| Fuel-efficient vehicles | $91,661 | A higher threshold can apply where the vehicle meets the ATO fuel-efficient definition. |
| Other vehicles | $80,809 | LCT can apply once the car's LCT value is above this amount. |
More info on the Australian Taxation Office, Luxury Car Tax rate and thresholds via the ATO website.
How Much LCT Adds to the Price
As an example, based on the current FY2026-2027 LCT thresholds if a vehicle that was not classified within the fuel-efficient vehicle category cost $89,809 at the time of purchase, the 33 per cent LCT payable would be based on the $9,000 the vehicle cost above the $80,809 threshold, not the entire vehicle cost.
As a general guide you can calculate LCT using the below method:
EV Thresholds and Legal Loopholes
Understanding the different LCT thresholds and how they are impacted by things like vehicle type, model grades and accessory fitment is a good way of finding legitimate, legal ways to either reduce how much LCT you will need to pay or even avoid it altogether.
Because the Australian government has put in place measures to make EVs more attractive, they benefit from a higher LCT threshold as they are considered a fuel-efficient vehicle.
Many buyers and employees accessing an electric vehicle novated leasing will use the LCT thresholds to guide their decide on the type of vehicle they select and how it is specified in terms of model grade and accessories.
Some of things to consider include choosing a trim level that keeps the vehicle’s price below the LCT threshold, limiting optional extras at the time of purchase that push the LCT value over the line, checking delivery timing across financial years and comparing eligible EVs with petrol or diesel alternatives.
Did you know EVs also receive further discounts and flexible terms as part of our MetroEco Electric Vehicles suite of finance products? To find out more, visit our MetroEco Hub.
Used Cars, Demos and Exemptions
There are lots of different types of vehicles on sale in Australia today that may or may not attract LCT. It’s important to note that just because a vehicle is imported by a ‘luxury brand’, doesn’t mean it automatically attracts LCT – the same can be said for some new, near-new and ex-demonstrator vehicles – every vehicle purchase has its own implications for LCT and how it is calculated.
It’s always a good idea to ask lots of questions before deciding to purchase or lease a vehicle to understand the full cost of the decision and any financial impacts that may come when you take delivery.
Based on a range of scenarios, some of the questions you might ask include:
| Scenario | What to ask |
|---|---|
| New car from a dealer | Is LCT already built into the quoted price? |
| Demonstrator or near-new car | Has LCT already been paid, and has the LCT value changed? |
| Older used car | Is the vehicle outside the relevant LCT window? |
| Imported vehicle | Who is responsible for LCT on importation and what value is used? |
| Commercial or modified vehicle* | Does an ATO exemption or exclusion actually apply? |
Got a question about Car Loans at Metro? Head to our personal finance car loan hub.
Get Clear on the Finance Before You Choose
At Metro, we’ve helped thousands of Aussies get into the car of their dreams with tailored financial solutions that suit them and their needs through our own award-winning local team and national network of trusted, experienced brokers. Before you start looking at vehicle spec sheets and colour options, first speak to your financial adviser or salary packager to understand what financial products may be right for you and how best to minimise or avoid any relevant taxes that may apply.
When you’re ready, contact Metro Finance and let’s start a conversation.
Frequently asked questions
What is luxury car tax in Australia?
Luxury Car Tax is an Australian tax that can apply when a car’s LCT value is above the relevant threshold. It generally applies only to the GST-exclusive amount above the threshold, not the full vehicle value.
What is the luxury car tax threshold for 2026-27?
For 2026-27, the Luxury Car Tax threshold is $91,661 for fuel-efficient vehicles and $80,809 for other vehicles. The applicable threshold depends on the financial year the car is imported, acquired or sold.
How much is luxury car tax on a car?
Luxury Car Tax is calculated at 33% on the GST-exclusive amount above the relevant threshold. The amount depends on the vehicle’s LCT value, the applicable threshold and whether any exclusions or reductions apply.
Does luxury car tax apply to a novated lease?
Luxury Car Tax can affect a novated lease if LCT is included in the vehicle purchase price being financed or packaged. The LCT position of the vehicle should be considered separately from salary packaging and FBT treatment.
Is there a luxury car tax loophole for EVs?
The legitimate opportunity for some EV buyers is the higher fuel-efficient vehicle threshold, which can provide more room before LCT applies. Separately, eligible EVs may receive different FBT treatment under certain novated lease arrangements.
Is Luxury Car Tax being scrapped in Australia?
As at publication, Luxury Car Tax has not been eliminated under the Australia-European Union Free Trade Agreement. Government material refers to a proposed new $120,000 LCT category for zero-emissions vehicles from 1 July 2027, subject to legislation.
Does luxury car tax apply to used cars?
Used, demonstrator and imported vehicles need scenario-specific checks. Buyers should ask whether LCT has already been paid, whether the vehicle is still within the relevant age window and whether the LCT value has changed.
