The Commissioner of State Revenue announced a temporary administrative change on 22 May 2020 to assist LMCTs impacted by the coronavirus pandemic.
Motor vehicle duty is payable under the Duties Act 2000 (the Act) when:
- A motor vehicle is first registered with VicRoads.
- Registration is transferred into someone else’s name.
- The predominant use of a motor vehicle changes.
It is calculated on the dutiable value of the vehicle. Revenue Ruling DA-022 clarifies the meaning of dutiable value of a new motor vehicle.
A licensed motor car trader (LMCT) has responsibilities under the Act regarding registration and paying duty. There are also exemptions available to LMCTs (Chapter 9 of the Act).
Registration and duty payments
You must register a new vehicle with VicRoads. You can register new vehicles directly into a customer’s name or into your own name.
In either case, duty must be paid to VicRoads at the time of the registration application unless an exemption applies.
Applications for the transfer of registration of a used vehicle into the buyer’s name must also be lodged with VicRoads. You must pay duty and the transfer fee within 14 days of delivering the vehicle.
Both the buyer and the LMCT are jointly and severally liable to pay the duty. If you, as an LMCT, have collected the duty from the buyer, you are solely liable for paying the duty to VicRoads.
Special arrangements for luxury cars ordered before 27 May 2019 and, because of delayed delivery, registered after 1 July 2019
As part of the 2019-20 Victorian Budget, the Treasurer announced increases in motor vehicle duty rates for luxury passenger cars valued over $100,000.
The new rates, which came into effect on 1 July 2019, apply to all vehicle transfers and registrations on or after this date. The Treasurer has, however, approved limited transitional relief for vehicles where there has been an unavoidable delay in their registration or transfer.
Refunds, exemptions and reductions
Refunds for purchasers
If you collect too much duty from a vehicle purchaser, they are entitled to be refunded the excess amount from you.
In such cases, you should contact us via email to arrange authorisation of a refund from VicRoads, which you can then pass on to the purchaser.
Refunds for dealers
You can request a duty refund in certain circumstances, such as overpayment, sale cancellation, incorrect registration or double payments.
In these cases, contact us via email, referring to 'Motor Vehicle Duty Exemption/Refund' in the subject line, to arrange authorisation of a refund from VicRoads.
What exemptions are available?
If you are an LMCT carrying on the business of:
- Wholesale dealings in motor vehicles, you may be entitled to an exemption on trading stock used solely for that purpose.
- Retail dealings in motor vehicles, you may be entitled to:
- An exemption on trading stock or demonstrator vehicles used predominantly for either or both of these purposes.
- An exemption on a service demonstrator vehicle. This is a motor vehicle used by you to sell another motor vehicle of the same class which is made available free to your customer for use while their motor vehicle is being serviced.
Temporary changes that affect these exemptions have been introduced due to the impact of coronavirus.
It is important that you apply these exemptions correctly. LMCTs are not automatically entitled to a duty exemption on every car acquired.
You must lodge an application with all supporting documents relevant to the circumstances of each exemption/concession so we can process your request.
Detailed information about these exemptions is contained in Revenue Ruling DA-034v2.
Change of vehicle use from trading stock demonstrator vehicle, or service demonstrator, to other non-exempt use
Duty is charged when the predominant use of a motor vehicle, which was previously exempt from duty because it was used as trading stock, a demonstrator vehicle or a service demonstrator vehicle, changes to some other use. Duty is charged at the equivalent rate to the general rates.
You must notify us within 14 days when the motor vehicle use changes from 'solely/primarily for the purpose of sale/demonstration' to another purpose, such as a customer loan car or service vehicle.
Revenue Ruling DA-035v2 provides guidance about determining when a change in the predominant use of a motor vehicle, from trading stock, a demonstrator vehicle, or a service demonstrator vehicle has occurred.
Under the Act, the exemptions for demonstrator vehicles and service demonstrator vehicles require that they are used 'solely or primarily' as a demonstrator vehicle or a service demonstrator vehicle.
Under Revenue Rulings DA-034v2 and DA-035v2, the Commissioner has ruled that a motor vehicle will not be considered as being used solely or primarily as a demonstrator vehicle or a service demonstrator vehicle where it:
- has travelled a distance of more than 7500km since its acquisition and initial registration in the name of the LMCT (distance travelled rule), or
- has been held for longer than 12 months after it was initially registered in the name of the LMCT as a demonstrator vehicle (length of ownership rule).
These rulings provide guidance in determining when a change in the predominant use of a motor vehicle has occurred, which requires the LMCT to lodge a 'change in use statement' and pay the applicable duty in respect of the vehicle.
The Commissioner has temporarily adjusted the length of ownership rule to assist LMCTs impacted by the coronavirus pandemic and help them continue to meet their exemption requirements. It means a motor vehicle can be considered as being used solely or primarily as a demonstrator vehicle or a service demonstrator vehicle where it has been held for up to 18 months after it was initially registered in the name of the LMCT as a demonstrator vehicle or a service demonstrator vehicle.
This 18-month rule applies for all vehicles registered as a demonstrator vehicle or service demonstrator vehicle by an LMCT between 1 March 2019 (1 July 2019 for service demonstrator vehicles) and 30 September 2020. The normal 12-month rule will apply to vehicles registered after this date.
All other elements of the exemption remain.
LMCTs must still ensure that the vehicle is used solely or primarily as a demonstrator vehicle or a service demonstrator vehicle at all times as required under the Act and in Revenue Rulings DA-034v2 and DA-035v2.
For example, if a vehicle has travelled a distance of more than 7500km since its acquisition and initial registration in the name of the LMCT, it will still be the case that a change in use will be considered to have occurred. In these instances, the LMCT must lodge a 'change in use statement' and pay the applicable duty.
An LMCT that has already paid duty under the change of use provisions and believes duty does not apply because of this temporary rule change should contact the State Revenue Office on 13 21 61 to discuss options available to seek a refund.
New vehicles may be sold as part of a drive-away deal. In these circumstances, you only have to pay duty on the dutiable value of the vehicle, not the drive-away deal price. To calculate the dutiable value of the drive-away deal, registration costs must be subtracted from the drive-away deal price with the balance divided by the relevant dividing factor.
We conduct compliance activities, including data matching, focused on validating dutiable values declared on applications for registration and transfer. Verification of applicant entitlements to the duty exemptions they have received for individual vehicles is also carried out.
Penalties may apply in cases of undervalued motor vehicles and incorrectly claimed exemptions.
For more information, refer to: