The Australian Taxation Office (ATO) has recently released Taxpayer Alert TA 2021/4: Structured arrangements that avoid luxury car tax. The ATO will be reviewing arrangements involving sales of both new and second-hand luxury cars between participating entities designed to improperly obtain refunds of luxury car tax (LCT) and evade LCT on the retail sale of the cars.
The arrangements the ATO is concerned with typically involve the following features:
- The supply of a luxury car to a pre-determined recipient identified by the controlling mind of the arrangement
- A number of wholesale sales of the car are purportedly made, along a chain of participating entities often acting in collusion, prior to the final retail sale of the pre-determined recipient
- One of the entities claims a refund of LCT while creating a consequential liability to another entity in the supply chain
- One or more of the participating entities (described as a ‘missing trader’) does not correctly report and pay their claimed LCT liabilities to the Commissioner.
The ATO will be engaging with taxpayers to ensure all parties have correctly met their LCT, GST and income tax obligations. Tax payers who adopt these types of arrangements, and their advisers, will be subject to increased scrutiny.
What should you do?
If you believe the ATO’s concerns apply to you, and if you have entered into similar arrangements to those described above, you should:
- Contact the ATO with any questions or queries
- Seek independent advice regarding the legal and tax consequences of your arrangement
- Make a voluntary disclosure to reduce penalties that may apply.
BDO Comment
We are seeing an increased level of ATO review and audit activity in regards to LCT, particularly where a dealer has claimed an LCT refund. Dealers should continue to be vigilant in their application of the LCT trading stock exemption available to dealers who quote for LCT purposes.
If you have any questions, or would like to discuss this alert, please contact our team.