The definition of fuel-efficient vehicles will change from 1 July 2025 for the purpose of the luxury car tax rules, due to amendments contained in the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025. Indexation rates applying to thresholds for fuel-efficient vehicles and other vehicles will be aligned.

The luxury car tax (LCT) threshold for the 2024-25 income year is $91,387 for fuel-efficient vehicles and $80,567 for other vehicles. 

The indexation factor for the 2024–25 income year for fuel-efficient vehicles is 1.023, and 1.047 for other vehicles. 

From 1 July 2025, a fuel-efficient car is defined as a vehicle that has a fuel consumption that does not exceed 3.5 litres per 100 kilometres as a combined rating under the vehicle standards in force under section 12 of the Road Vehicle Standards Act 2018.

Prior to 1 July 2025, a fuel-efficient car was defined as a vehicle with a fuel consumption that doesn’t exceed 7 litres per 100 kilometres.

The pre-1 July 2025 definition will apply to a car, if, before 1 July 2025:

• An entity made a supply or importation of the car, and
• The car was used in Australia for a purpose other than a purpose mentioned in subsection 9-5(1) of the LCT Act.