On Thursday 11 August 2016, the Victorian Court of Appeal unanimously dismissed a taxpayer’s appeal against an earlier decision which had refused the taxpayer’s duty exemption claim on 2 vehicles under s231(2)(a) of the Duties Act 2000 (Vic).

The above section (s231) provides an exemption from the imposition of duty on the registration of a motor vehicle, by a retail ‘license motor car trader’, for the sale of that vehicle or for use as a ‘demonstrator’.

The taxpayer was both an importer/distributor of Mercedes-Benz vehicles and a retailer through dealerships. The 2 subject vehicles were provided to customers, as service demonstrator vehicles, while their current vehicles were being serviced. The taxpayer was trying to say that ‘courtesy cars’ were also serving the purpose of demonstrating the vehicles and the being sold as such.

The taxpayer paid duty on the registration of the 2 vehicles and then objected to the imposition of duty. The cars registered in October 2013 were later sold to private buyers in December 2013 and October 2014, respectively. The Victorian Civil and Administrative Tribunal concluded that the vehicles did not qualify for the exemption.

The Court of Appeal dismissed the taxpayer’s appeal ruling that no error of law had been identified by the taxpayer. In doing so, the Court said the Tribunal correctly identified that the taxpayer’s primary purpose in registering the 2 vehicles was for use as alternative transport for customers who were having their own cars serviced and not as a demonstration vehicle.

(Mercedes-Benz Australia/Pacific Pty Ltd v Comr of State Revenue [2016] VSCA 194, Victorian Court of Appeal, Tate, Beach and Ferguson JJA, 11 August 2016.)

Section 231(2) of the Duties Act

(2)     No duty is chargeable under this Chapter on an application by a licensed motor car trader who carries on a business of dealing, for the purpose of sale by retail, in motor vehicles for registration or transfer of registration of a motor vehicle—

(a)     in the course of, and for the purpose of carrying on that business and solely or primarily for the purpose of either or both of the following—

              (i)     the sale of the motor vehicle;

              (ii)     the use of the motor vehicle as a demonstrator vehicle;