GST issues registers

Motor vehicle industry partnership

Issue 2 - Cars for use by people with a disability

The web guidance, Tax concessions - cars is available at ato.gov.au which has more information on this issue.

2.a. Who is an eligible person with a disability?

Non-interpretative - straight application of the law.

For GST and luxury car tax purposes an eligible person with a disability is a person:

1.

who has served in the Defence Force or any other armed force of Her Majesty, and as a result of that service has

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lost a leg or both arms, or

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had a leg or both arms rendered permanently and completely useless, or

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is a veteran to whom section 24 of the Veterans' Entitlements Act 1986 applies and receives a pension under Part II of that Act, or

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is receiving a Special Rate Disability Pension under Part 6 of Chapter 4 of the Military Rehabilitation and Compensation Act 2004, or satisfies the eligibility criteria in section 199 of that Act.

2.

who has a permanent certificate issued by Medibank Health Solutions certifying that the person has lost the use of one or more limbs to such an extent that they are unable to use public transport or, from 9 December 2020 a current certificate of medical eligibility issued by a registered medical practitioner certifying that the person has lost the use of one or more limbs to such an extent that they are unable to use public transport .

2.b. Can an eligible person with a disability purchase or lease a car GST-free?

Non-interpretative - straight application of the law.

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Yes. A supply of a car, including a supply by way of lease, is GST-free where it is to:

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an eligible disabled veteran who intends to use the car for their personal transportation, for the whole of the Subdivision 38-P period, that is, the earlier of two years or until the car has travelled 40,000km, or

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a person who has a certificate as described above who intends to use the car for their personal transportation to or from gainful employment for the whole of the Subdivision 38-P period, that is, the earlier of two years or until the car has travelled 40,000kms.

The supply of a car by way of purchase is GST-free up to the car limit. Where the GST-inclusive market value of the car exceeds the car limit, GST is payable on the amount above the limit.

When working out the GST-inclusive market value of the car, disregard any value that is attributable to modifications made to the car solely for the purpose of:

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adapting it for driving by an eligible person with a disability, or

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adapting it for transporting an eligible person with a disability.

2.c. Can an eligible person with a disability acquire car parts GST-free?

Non-interpretative - straight application of the law.

An eligible person with a disability can acquire parts for their car GST-free.

2.d. Are oils and lubricants purchased by a person with a disability 'parts' for the purposes of the Subdivision 38-P of the GST Act?

2.e. What medical aids or appliances in relation to motor vehicles for use by people with a disability are GST-free?

Non-interpretative - straight application of the law.

The following things for a motor vehicle are GST-free:

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special purpose car seats

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car seat harness specifically designed for people with disabilities

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wheelchair and occupant restraints

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wheelchair ramps

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electric/hydraulic wheelchair lifting devices

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motor vehicle modifications

providing the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.

2.f. How does luxury car tax (LCT) apply to cars for people with disabilities?

Non-interpretative - straight application of the law.

Cars that are specially fitted out for transporting people with a disability seated in wheelchairs are excluded from the definition of luxury car and are not subject to luxury car tax (unless the supply is GST-free). A person with a disability is defined as a disabled veteran or a person who has lost the use of one or more limbs to such an extent that they are unable to use public transport.

2.g. How does luxury car tax apply on cars that are GST-free?

Non-interpretative - straight application of the law.

If the supply of the luxury car is GST-free under Subdivision 38-P of the GST Act the car is subject to luxury car tax.

The value of the car for luxury car tax purposes does not include the value of modifications made to the car that are made solely for the purpose of adapting it for driving by, or for transporting, a person with a disability.

2.h. How is GST and LCT calculated on cars purchased by a person with a disability?

Non-interpretative - straight application of the law.

If the supply of a car is GST-free and the price exceeds the car limit, the car is a luxury car and subject to luxury car tax.

When the supply of a car is GST-free to a person with a disability, the luxury car tax value of the car will need to include an amount equal to the amount of GST that would otherwise have been payable. A notional GST amount is imputed in the luxury car tax value for purposes of calculating luxury car tax.

The luxury car tax value does not include modifications made to a car that are solely for:

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adapting it for driving by a person with a disability, or

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adapting it for transporting a person with a disability.

For more information, refer to the web guidance, Exemption from luxury car tax available at ato.gov.au.

2.i. Will dealers be required to obtain documentation to support GST-free or luxury car tax free car sales to a person with a disability?

Non-interpretative - straight application of the law.

Yes. If an eligible person with a disability buys a car or car parts GST-free or a car fitted out to transport people with a disability seated in wheelchairs free of luxury car tax, they must give the supplier a declaration in the approved form. This will substantiate that the person is buying the car GST-free or luxury car tax free, or buying car parts GST-free.

The ATO, in consultation with other departments, has developed Declarations to the Commissioner which will be provided by the person with a disability to the dealer when purchasing a car.

2.j. Is a dealer entitled to an input tax credit on a second-hand car acquired from an unregistered entity that is sold GST-free to an eligible person with a disability?

Non-interpretative - straight application of the law.

A dealer is not entitled to an input tax credit in these circumstances. Where a dealer acquires a second-hand car for the purposes of sale or exchange, the GST Act entitles a dealer to claim an input tax credit in respect of creditable acquisitions of second-hand vehicles from unregistered vendors.

However, an input tax credit is not available if the dealer makes a supply of the vehicle that is not a taxable supply. As the supply to an eligible person with a disability is a GST-free supply the dealer is not entitled to an input tax credit.

Dealers should take this into account when pricing the vehicle to a person with a disability so that the dealer's profit margin can be maintained.

This issue was referred to the Australian Competition and Consumer Commission (ACCC) and the advice confirmed that dealers would not be contravening pricing guidelines if they maintain their same profit margin when selling to a person with a disability.

2.k. Can input tax credits be claimed by an eligible person with a disability on a car they have acquired or imported GST-free?

Non-interpretative - straight application of the law.

No. If an eligible person with a disability has acquired or imported a car GST-free they cannot claim an input tax credit.

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