Luxury tax on aircraft and vessels — The luxury tax on aircraft and vessels has ended — but not on vehicles

How it works

The luxury tax applies to certain high-value purchases. It is calculated as the lesser of two amounts: 10% of the total value, and 20% of the value above the threshold.

The thresholds are $100,000 for vehicles and aircraft, and $250,000 for vessels.

The tax no longer applies to subject aircraft or subject vessels. It continues to apply, entirely unchanged, to subject vehicles priced above $100,000.

The tax reaches further than an outright purchase. It applies to sales, leases, imports and improvements — so leasing an item rather than buying it does not avoid it, and neither does importing one.

Improvements matter more than people expect. Work done to an item after purchase can bring its value above a threshold it started below, and the tax can follow. A vehicle bought under $100,000 and then substantially upgraded is not automatically outside the rules.

How it applies to you

Businesses buying or selling aircraft and boats above the thresholds — for those, the tax is gone from 5 November 2025 on sales, leases, imports and improvements.

And, just as importantly, anyone buying a high-value vehicle who has heard that “the luxury tax was scrapped”. It was not. Only two of its three components ended.

A company purchasing a vehicle over $100,000 is still within the tax. That is the misunderstanding most likely to cost someone money here.

Vendors normally collect the tax within the price. It is easy to miss on a quote and hard to dispute later, so ask before signing.

Luxury tax is separate from vehicle deduction rules, which are unchanged. A vehicle above the capital cost allowance limit has restricted deductions either way — two independent rules.

How to calculate it

For a subject vehicle, which is still taxed, take the lesser of two calculations:

What changed

The luxury tax is the lesser of 10% of the total value and 20% of the value above the threshold — $100,000 for vehicles and aircraft, $250,000 for vessels. The aircraft and vessel components are gone; the vehicle component is untouched.

What to do

If you are buying a vehicle over $100,000 through your company, the luxury tax still applies and should be in the budget.

If you are buying an aircraft or a vessel, it does not, for sales, leases, imports and improvements from 5 November 2025.

The headline “luxury tax ended” is true for two of three categories and false for the one most businesses encounter. Check which category the purchase falls into before relying on it.

The terms used on this page

Subject vehicle

A vehicle within the luxury tax rules, priced above $100,000. Still taxed.

Subject aircraft / subject vessel

Aircraft and boats within the rules. No longer taxed.

Threshold

The value above which the tax applies — $100,000 for vehicles and aircraft, $250,000 for vessels.

Common questions about luxury tax on aircraft and vessels

Where this comes from

Every figure on this page is taken from the source below, not from interpretation:

• CRA — LTN5, Luxury tax not payable on subject aircraft and subject vessels
• Budget 2025 — Tax measures: supplementary information

General information, not tax advice. This page explains a change in general terms. It cannot account for your circumstances and does not create a professional relationship. Confirm anything that affects a decision — send an enquiry.