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Thresholds verified August 2026. Both figures are indexed each July.
The two numbers, side by side
| Luxury car tax | Car limit (depreciation cost limit) | |
|---|---|---|
| What it does | Adds 33% to the GST-inclusive value above the threshold at sale or import, priced into what you pay | Caps the cost base for depreciation, including the instant asset write-off, and caps GST credits at one eleventh of the limit |
| Thresholds | Two tiers: a standard threshold and a higher fuel-efficient tier, in the $80,000 to $91,000 range in recent years, indexed each July | One figure, around $69,000 to $70,000 recently, indexed each July |
| Who bears it | Built into the purchase price, with dealers remitting it | The buyer's tax return absorbs it, silently |
| EV interaction | The fuel-efficient tier plus the FBT exemption below it makes sub-threshold EVs the packaging sweet spot | EVs get no special car-limit treatment |
What the car limit does to a $120,000 vehicle
- Depreciation: claimable on about $70,000 only. The other $50,000 is never deducted, by anyone, ever.
- GST credits: capped at one eleventh of the car limit, roughly $6,300, not one eleventh of the price. Another $4,500 or so of credits forfeited.
- LCT already inside the price: several thousand dollars of 33% tax on the slice above the LCT threshold, non-deductible and non-creditable.
- FBT if privately used: the statutory formula runs on the full cost, the one calculation that ignores the limit, in the ATO's favour.
Stack them and the honest advice appears: the tax system stops subsidising cars around $70,000. Everything above that is after-tax lifestyle spend wearing a business badge, and "the business is buying it" changes the paperwork, not the economics.
The carve-outs worth knowing: genuine commercial vehicles, the one-tonne utes and vans of the FBT rules, sit outside LCT and, where not principally passenger-carrying, outside the car limit. That is the legitimate reason work fleets escape both. Primary producers and tourism operators also have narrow LCT refund concessions.
Where it lands in returns: the limit applies per vehicle in the depreciation labels of the company return, and the credit cap in the BAS. Over-claimed car GST and full-price write-offs are standard adjustments in small business reviews, and past over-claims are cheaper amended than found.
Frequently asked questions
What is the luxury car tax threshold?
What is the car limit?
Can my business claim the full cost of an expensive car?
Do utes pay luxury car tax?
Why are EVs everywhere in salary packaging?
General information only - not personal tax, financial or legal advice. Consider your own circumstances or speak to a registered tax agent. Remission of penalties or interest and payment plans are decisions of the ATO and outcomes can't be guaranteed.