When you buy a used car in Australia, the question of whether you must add the 10 per cent tax to the purchase price often comes up first.
Beyond GST, buyers also need to budget for stamp duty, insurance premiums and ongoing operating expenses such as fuel and maintenance.
Private sales versus dealership purchases
If you buy from a private individual, the tax does not apply to the transaction. The seller does not need to collect it, and the buyer does not have to pay it.
Because the transaction is between individuals, there is no requirement to remit GST to the Australian Taxation Office.
Buying the same model from a dealer, however, means the tax is added on top of the listed price. The dealer also has to provide a statutory warranty, cover rent, and pay staff wages.
Dealers must also cover the cost of their premises, utilities and staff salaries, which are factored into the final price.
This extra cost can make a dealer’s offer noticeably higher than a private deal, even though the vehicle itself may be identical.
The statutory warranty mandated for used‑car dealers adds a further layer of protection that private sellers are not obliged to provide.
Some buyers accept the higher price for the peace of mind that comes with the warranty, while others prefer the lower out‑of‑pocket amount from a private sale.
How the tax works on new vehicles
For brand‑new cars, the law requires the tax to be included in the advertised price. Dealers cannot hide it in “on‑road costs” or other fees.
The GST regime was introduced in 2001 to replace a patchwork of state sales taxes with a uniform 10 per cent levy.
Unlike some overseas markets where the tax is disclosed only at checkout, Australian advertisements must show the GST‑inclusive price up front.
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Because the tax adds a flat 10 per cent, it can represent a significant jump for vehicles priced in the tens of thousands.
Consequently, a vehicle priced at $30,000 before tax jumps to $33,000 once GST is applied, a noticeable increase for most budgets.
That increase can influence a buyer’s decision between a new model and a comparable used one.
Claiming credits for business use
Businesses registered for the tax may claim a partial credit based on how much the vehicle is used for work. The credit is proportional to the business‑use percentage.
If a vehicle is used 100 per cent for business, the full amount of the tax can be reclaimed, subject to a limit of $68,108 for the 2023/2024 financial year.
The limit means you can claim a maximum of one‑eleventh of that limit.
In certain cases, a full credit is allowed even when the price exceeds the limit. Those cases include vehicles held as trading stock, research and development projects, or exports that are tax‑free.
For a commercial vehicle designed primarily for cargo rather than passengers, the tax can also be fully reclaimed, mirroring the exemption that applies to utes and vans under the luxury car tax rules.
Exceptions and special vehicle categories
Some vehicles qualify for a full credit regardless of price. These include emergency vehicles, motorhomes, campervans, and specially equipped wheelchair transport units.
Vehicles used solely as trading stock, or those involved in manufacturing research, also meet the criteria for a complete refund of the tax.
Exporting a car under conditions that make the sale tax‑free is another pathway to a full credit.
These exceptions reflect the policy’s aim to support certain commercial activities and essential services.