In last year’s budget, the federal government announced a new tax on the sale of select luxury goods, as highlighted in Ryan Tax Alert | Federal Budget 2021. While this luxury tax was originally intended to take effect on January 1, 2022, in the Economic and Fiscal Update 2021 announced on December 14, the government indicated that draft legislation and further details on implementation will be released in early 2022, once the results of public consultation have been factored into the design of the new tax.
In the meantime, the proposed luxury tax has been outlined in a technical paper, Consultation on the Select Luxury Goods Tax, issued by the Department of Finance. Once implemented, the luxury tax is expected to apply to most new cars and recreational boats, as well as certain aircraft (i.e., those intended for personal use), with a before-tax selling price in excess of $100,000 for vehicles and aircraft, and $250,000 for boats. It is anticipated that the luxury tax will have its own tax regime, including specific rules for registration, administration, and enforcement, and generally be calculated as the lesser of 10% of the total price and 20% of the total price in excess of $100,000 for vehicles and aircraft and $250,000 for boats.
Interestingly, GST/HST will apply to the final selling price of select luxury goods, inclusive of the luxury tax.
Ryan continues to monitor the introduction of the luxury tax closely and will provide further information on the administration and application of this new tax once the implementation details have been confirmed by the federal government.
Please contact the Ryan TaxDirect® line if you have any questions or concerns about the implementation of the luxury tax.