Motor vehicle change of use provisions

DA-035v2

This ruling should be read in conjunction with the motor vehicle duty relief measure introduced by the Commissioner of State Revenue on 22 May 2020 to assist licensed motor car traders who have been impacted by the coronavirus pandemic. The length of ownership associated with exemptions from motor vehicle duty available for licensed motor car traders has been extended from 12 to 18 months for all vehicles registered as  a demonstrator or service demonstrator vehicle between 1 March 2019 (1 July 2019 for service demonstrator vehicles) and 30 September 2020.

This ruling replaces DA-035 to take into account:

• the exemption from motor vehicle duty (MVD) on the registration or transfer of a service demonstrator vehicle on or after 1 July 2019, and
• the change in the rate of MVD payable on a statement of change in use of a motor vehicle.

These are measures announced in the Victorian Government’s 2019-20 Budget.

Preamble

Chapter 9 of the Duties Act 2000 (the Act) charges MVD on an application for the registration or transfer of registration of a motor vehicle unless an exemption applies. MVD is calculated on the dutiable value of the motor vehicle.

Section 231 of the Act provides an exemption from MVD on an application by a Licensed Motor Car Trader (LMCT) for registration or transfer of registration of a motor vehicle if the motor vehicle is trading stock, a demonstrator vehicle or a service demonstrator vehicle.

Revenue Ruling DA-034v2 provides guidance on the application of these exemptions and should be read in conjunction with this Ruling.

Section 238 of the Act charges MVD where there is a change in the predominant use of a motor vehicle from being trading stock, a demonstrator vehicle or a service demonstrator vehicle and MVD would have been chargeable if an application for registration or transfer of registration was lodged in connection with the change in use.

MVD is imposed where the previous registration of the motor vehicle was exempted from MVD. The registered operator of the motor vehicle must, within 14 days of the change in use, lodge a statement of the change in use with the Commissioner of State Revenue and pay MVD on the dutiable value of the motor vehicle as at the time the change occurred. MVD is calculated at the rates set out in section 238(2) of the Act. 

Where the registered operator fails to comply with the requirement to lodge a change in use statement and pay the applicable duty, it will be liable to a penalty under section 238 of the Act in addition to any penalty tax and interest payable under the Taxation Administration Act 1997.

The purpose of this Revenue Ruling is to provide guidance in determining when a change in the predominant use of a motor vehicle from being trading stock, a demonstrator vehicle or a service demonstrator vehicle has occurred.

Ruling

In determining whether a motor vehicle’s predominant use has changed, the SRO will consider if the motor vehicle is used for any of the purposes or uses outlined in Revenue Ruling DA-034v2 in conjunction with (but not limited to) the following criteria:

1. Distance travelled

In considering the total distance travelled by the motor vehicle, if the motor vehicle is used for non-exempt purposes, the use of the motor vehicle as a whole will be considered. Where the  motor vehicle is no longer used primarily for an exempt purpose, the motor vehicle’s predominant use is considered to have changed.

2. Length of ownership – demonstrator vehicles and service demonstrator vehicles

The longer the period a vehicle is registered in the name of an LMCT, the more likely that the vehicle will be considered as not being used as a demonstrator vehicle or service demonstrator vehicle.

Where the motor vehicle is held by the LMCT as a demonstrator vehicle or service demonstrator vehicle and the period since its initial registration has reached 12 months, the SRO will consider that the motor vehicle has ceased to be a demonstrator vehicle or service demonstrator vehicle.

An LMCT with unique or high end stock for which they are seeking an extension to the 12 month requirement may request a private ruling from the SRO. This should be requested prior to expiration of the 12 month period.

3. Personalised number plates

Where the motor vehicle is registered using a personalised number plate of the LMCT or its staff, and there is evidence to indicate that the motor vehicle is not used primarily as trading stock, a demonstrator vehicle or a service demonstrator vehicle, the SRO considers that the motor vehicle’s predominant use has changed.

4. Fringe benefits tax (FBT) returns/employment agreement

Where the FBT returns and employment agreements in respect of the motor vehicle show that private use by director(s), staff, employees of the LMCT or their family members is the primary use, the SRO considers that a change in the predominant use of the motor vehicle has occurred. Similarly, where the motor vehicle is provided to an employee or their family members as part of the employee’s salary package, the motor vehicle ceases to qualify as a demonstrator vehicle, a service demonstrator vehicle or trading stock. In this situation, the SRO also considers that the motor vehicle’s predominant use has changed.

In determining if a change in the predominant use of the motor vehicle has occurred, the SRO will consider any of the above criteria, individually or collectively. The SRO will also examine the frequency, degree, extent and intensity of uses attributed to the primary use as trading stock, a demonstrator vehicle or a service demonstrator vehicle, as well as the location of the motor vehicle.

Where the motor vehicle ceases being used solely as trading stock under section 231(1) by an LMCT who carries on a business of wholesale dealing in motor vehicles, the SRO considers that a change in the predominant use has occurred and MVD will be imposed pursuant to section 238 of the Act.

Where the motor vehicle ceases being used solely or primarily as trading stock, as a demonstrator vehicle, or a service demonstrator vehicle under section 231(2)(a) by an LMCT who carries on a business of retail dealing in motor vehicles, the SRO considers that a change in the predominant use has occurred and MVD will be  imposed in accordance with section 238 of the Act.

Supporting evidence to be considered

In determining whether a change in the predominant use of a motor vehicle has occurred, the SRO will examine items including (but not limited to) the following:

• log books,
• trading stock records,
• the demonstrator subsidy arrangement between the LMCT and the manufacturer or supplier,
• list of vehicles and location of vehicles,
• records of use and/or driver of the vehicles,
• FBT returns,
• employment contracts,
• odometer readings,
• length of ownership between acquisition as trading stock and disposal,
• length of time between initial registration of demonstrator vehicle or service demonstrator vehicle and disposal,
• insurance policy contracts,
• floor plan finance agreement,
• balance sheets and accounts of the LMCT,
• any other documents that are relevant for the purposes of determining the usage of the vehicles.

Where an LMCT disagrees with the SRO’s determination that a change in the predominant use of a motor vehicle has occurred, the onus is on the LMCT to demonstrate to the SRO that the motor vehicle is not liable for MVD under section 238 of the Act.

Commissioner of State Revenue

Note: Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN-001.