Australians shopping for a new luxury vehicle from 1 July 2026 will benefit from slightly higher Luxury Car Tax (LCT) thresholds, following the Australian Taxation Office’s annual indexation update for the 2026-27 financial year.
The updated thresholds mean vehicles can be priced slightly higher before attracting Luxury Car Tax, although the increase is relatively modest compared with the previous financial year.
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New LCT thresholds from 1 July 2026
According to the Australian Taxation Office (ATO), the Luxury Car Tax threshold for fuel-efficient vehicles will increase to $91,661 for the 2026-27 financial year, up from $91,387 in 2025-26. For all other vehicles, the threshold will rise to $80,809, compared with $80,567 in the previous financial year.
| Financial Year | Fuel-efficient vehicles | Other vehicles |
| 2026-27 | $91,661 | $80,809 |
| 2025-26 | $91,387 | $80,567 |
| 2024-25 | $91,387 | $80,567 |
The changes are based on the CPI indexation factor of 1.003 applied for the 2026-27 financial year.
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What is Luxury Car Tax?
Luxury Car Tax is a tax applied to eligible vehicles whose value exceeds the government’s prescribed threshold. It is levied on the GST-inclusive value of a vehicle above the applicable threshold and is commonly relevant to premium passenger vehicles, luxury SUVs and some electric vehicles.
The higher threshold for fuel-efficient vehicles is designed to provide additional support for lower-emissions models.
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New fuel-efficient vehicle definition also applies
Alongside the updated thresholds, a revised definition of a fuel-efficient vehicle will apply from 1 July 2026.
Dealers have been advised to familiarise themselves with the updated requirements and ensure their systems are prepared before the new financial year begins. The ATO has also encouraged businesses to seek professional taxation advice where required.
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What does it mean for buyers?
While the increases are relatively small, the updated thresholds may help some buyers avoid or reduce Luxury Car Tax liabilities on vehicles that sit close to the threshold limits.
For most luxury vehicle purchases, however, the impact is likely to be minor, with the changes primarily reflecting routine annual indexation rather than a significant policy shift.
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