Luxury Car Tax: Is Your Next Car Over the Line?

You've found the car. The sticker price looks fine. Then the drive-away quote lands a few thousand dollars higher than you expected, and buried in the numbers is a line called Luxury Car Tax. If your next car sits anywhere near the top of your budget, LCT is worth understanding before you sign — because it can quietly reshape what you actually pay.

What Luxury Car Tax actually is

Luxury Car Tax (LCT) is a federal tax applied to cars priced above a set threshold. Despite the name, it isn't reserved for exotics — plenty of mainstream family SUVs and dual-cab utes with a few options ticked can cross the line. The tax is charged at a flat rate on the amount above the threshold, not on the whole price, and it's usually paid by the dealer or importer and then passed straight on to you.

The key detail most buyers miss: LCT is calculated on the GST-inclusive value of the car, including many dealer-fitted accessories and delivery costs — but before things like stamp duty and registration. That's why it can appear as its own line in a drive-away build-up rather than being folded neatly into the sticker.

The two thresholds — and why there are two

Australia doesn't have one LCT threshold, it has two: a higher one for fuel-efficient vehicles and a lower one for everything else. The fuel-efficient threshold gives more headroom to genuinely low-emission cars, so a qualifying car can be worth more before LCT bites than a comparably priced petrol V6. One important catch: the bar for what counts as 'fuel-efficient' was tightened sharply from 1 July 2025, so in practice it's mostly EVs that now qualify — far fewer hybrids make the cut than used to.

• The standard threshold applies to most petrol and diesel vehicles.
• The fuel-efficient threshold is higher, giving qualifying low-emission cars more room before LCT applies — but the fuel-consumption bar to qualify was tightened in 2025, so many hybrids that once counted no longer do.
• Both thresholds are indexed and change over financial years, so last year's figure may already be out of date.

Because those numbers move — and because whether a given car counts as fuel-efficient can change too — we deliberately don't hard-quote them here. Run your specific car through the Luxury Car Tax threshold check to see the current thresholds and whether your car is over the line — it's the only way to get an answer that's right for this financial year.

How LCT shows up in your real price

LCT rarely arrives on its own. It stacks on top of the base price and combines with GST, stamp duty and registration to create the gap between the advertised price and the drive-away figure. Two cars with near-identical list prices can end up hundreds or thousands apart at the counter if one tips over the threshold and the other doesn't.

The cleanest way to see the full picture is to build the whole on-road price at once. Our drive-away price calculator lays out base price, GST, LCT, stamp duty and rego side by side, so you can see exactly which tax is doing what — and where you might trim.

Ways buyers legitimately stay under the line

You can't wish LCT away, but you can make informed choices around it:

• Choose a genuinely fuel-efficient model that still qualifies for the higher threshold — most EVs do, but since the rules tightened far fewer hybrids qualify, so confirm your specific model rather than assuming.
• Watch the options list. Dealer-fitted accessories can be what pushes a car from just under to just over the threshold.
• Consider whether accessories are fitted before or after purchase, as this can change how they're treated — confirm the specifics with the dealer and the ATO.
• Remember some vehicles are exempt or treated differently, including certain commercial vehicles not designed mainly to carry passengers, and cars for eligible buyers such as some primary producers.

If you're financing or salary-packaging

LCT still applies whether you pay cash, take a car loan or salary-package the vehicle — but the way it interacts with the numbers differs. On a novated lease, for example, an EV priced under the fuel-efficient LCT threshold can also qualify for the FBT exemption, which is why running the maths matters (note the FBT break no longer applies to plug-in hybrids ordered from 1 April 2025). Compare the real net position with our novated lease calculator and, if you're weighing a straight loan, the car loan repayment calculator.

Whatever route you choose, treat any dollar figure you read online — including here — as a prompt to check, not a fact to bank on. Thresholds, rates and the fuel-efficient definition all change, and your car's exact configuration is what decides the outcome.

General information only — not financial, tax or legal advice. Figures change; confirm with the ATO, your state revenue office and a licensed adviser, and use the calculators for your own numbers.