Is a Hummer a Limousine? by TurksLegal

Is a Hummer a Limousine? A PAPER BY PAUL ANDERSON JULY 2010

Is a Hummer a Limousine?

Summary A recent Federal Court decision has considered the novel question of whether a Hummer is a limousine.

Who Does This Impact? Importers and sellers of luxury cars.

What Action Should Be Taken? Importers and sellers of luxury cars should be aware of the decision and take appropriate legal and accounting advice, where appropriate.

Contents:

TURKSLEGAL

Legislation

Findings

Appeal

Conclusion

PAPER

Is a Hummer a Limousine? by Paul Anderson

The recent Federal Court decision of Dream Tech International Pty Limited v Commissioner of Taxation raises the novel question of whether a Krystal Hummer imported from the USA was a limousine.

Legislation Under Section 7-5 of the A New Tax System (Luxury Car Tax) Act Act, 1999 (the ‘LCT Act’) luxury car tax is payable on all taxable importations of luxury cars. A ‘luxury car’ is defined as a car whose luxury car tax value exceeds the luxury car tax threshold. It was conceded that the luxury car tax value of the Hummer exceeded the luxury tax threshold. Accordingly, the Hummer was a luxury car for purposes of the LCT Act subject to the luxury car tax if it met the statutory definition of a ‘car’. Section 27-1 of the LCT Act defines ‘car’ as meaning: ‘A motor vehicle (except a motor cycle or similar vehicle) that is: (a) designed to carry a load of less than 2 tonnes and fewer than nine passengers; or (b) a limousine (regardless of the number of passengers it is designed to carry).’ ‘Motor vehicle’ is defined as: ‘a motor powered road vehicle (including a 4 wheel drive vehicle).’ The Hummer was designed to carry more than nine passengers. As a result, it could only be a ‘car’ if it was a ‘limousine’ which was not defined.

Findings The Administrative Appeals Tribunal at ﬁrst instance made the following ﬁndings: •

The Hummer is modelled on a United States military vehicle known as a Humvee and is designed for both road and off road driving;

•

The Hummer is stretched to 140 inches in length, weighs 5.82 tonnes and has a carrying capacity of 14 people, including the driver;

•

The body of the Hummer is bolted on to the top of the chassis, which is based on a type used by General Motors for pick up trucks;

•

The Hummer has truck tyres capable of carrying 2.7 tonnes each;

•

The Hummer has a heavy duty suspension designed for high load capacity which compromises the quality of the ride. The Tribunal described the ride as ‘rather ﬁrm’;

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Is a Hummer a Limousine? by Paul Anderson

•

The Hummer is classiﬁed as a bus for the purposes of the Department of Transport and Regional Services Rules. It is considerably longer than a small bus but unlike a bus, it has a low proﬁle which makes it impossible for passengers to stand upright and walk around inside, and provides limited headroom for seated passengers. Passengers’ knees are higher than hip level when they are seated, resulting in reduced comfort. The Tribunal considered the Hummer ‘rather cramped’ inside.

•

The driver’s compartment is separated from the passenger compartment by a partition and the two compartments are connected by an intercom.

•

The interior of the Hummer features black vinyl seat coverings, ﬂashing lights and strobe lights under the seats, and a reﬂective polished metal roof containing small multi-coloured lights described as ‘disco lights’ by the Tribunal; and

•

The Hummer has three liquid crystal display screens, a DVD player, a high volume built-in sound system, drinking glasses and large ice buckets for alcoholic beverages.

Overall, the Tribunal considered it appropriate to describe the Hummer as a ‘mobile night club’ or a ‘party vehicle’. The Hummer was described as a limousine in promotional materials and one advertising brochure stated that the Hummer would make a passenger ‘feel like the toast of the town’ and like ‘a Hollywood movie star’. The Tribunal then found that a ‘limousine’ in colloquial speech was ‘considerably larger than a standard road vehicle, conveying a sense of luxurious motor transport driven by a chauffeur’. Applying this deﬁnition, the Tribunal held that a Hummer was a limousine.

Appeal An appeal to the Federal Court only lies on a question of law. Kenny, J agreed with the Tribunal that the applicable principle of statutory interpretation was that ‘limousine’ should be given its ordinary meaning, having regard to the context in which it appears in the LCT Act. The Tribunal had also looked at three dictionary deﬁnitions of ‘limousine’, namely: •

Shorter Oxford English Dictionary: ‘A motor car with a closed body and roofed place for the driver.’

•

Australian Concise Oxford Dictionary: ‘A large luxurious motor car, often with a partition behind the driver.’

•

Macquarie Dictionary: 1.

‘Any large, luxurious car, esp. a chauffeur driven one.

An airline bus carrying passengers between the city terminal and the airport.’

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Is a Hummer a Limousine? by Paul Anderson

The main ground for appeal was that the Tribunal had erred in finding that the Hummer was luxurious. For example, it was argued that this required quality suspension, sound proofing and a leather interior, none of which applied in the case of the Hummer. The Tribunal had taken the view that luxury is in the eye of the beholder. It was necessary to look at the question from the point of view of persons under 30 years of age who were the target market for the Hummer. ‘The Hummer is clearly designed to attract younger people for the purpose of having a good time. It has all the characteristics which young people would, in my opinion, find luxurious. That is, luxuriously styled seating covered with black vinyl, ice buckets and glasses for drinking, a DVD player and screens, no doubt to play music videos at very loud sound levels. In addition, it has a reflective polished metal interior roof fitted with what can only be described as disco lights. It is not difficult to accept that these features are attractive to young people who would see them as luxurious despite the fact that some of us, who have reached a certain age, would not necessarily agree. For those young people to whom this vehicle would appeal, a good quality suspension, sound proofing and quality interior including wood panel finish would simply not be relevant. ‘ Kenny, J found that the Tribunal had not taken into account any irrelevant considerations in reaching the decision and dismissed the appeal. The addition of ‘limousine’ to the statutory definition of ‘car’ was intended to cover luxury vehicles designed for carrying more than nine passengers, which would otherwise not be subject to luxury car tax.

Conclusion Although of limited factual application, the case provides an interesting insight into judicial reasoning when dealing with a novel question.

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Is a Hummer a Limousine? by Paul Anderson

For more information, please contact: Paul Anderson Partner T: 02 8257 5742 paul.anderson@turkslegal.com.au

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