On 29 June 2022, the Government announced a proposal to exempt the private use of eligible electric cars from Fringe Benefits Tax (FBT).

The legislation making this exemption has finally been passed so from 1 July 2022, employers will not pay FBT on benefits provided for eligible electric cars and their associated car expenses.

EV FBT Exemption details

To be eligible for the exemption the car needs to meet ALL of the following conditions:

1. It is a CAR designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).  Motorcycles & scooters are not cars for FBT purposes so do not qualify for the exemption even if they are electric.
2. The car is a Zero or low emissions vehicle.  This means it needs to be a battery electric vehicle; a hydrogen fuel cell electric vehicle; or a plug-in hybrid electric vehicle*.
3. The first time the car is both held AND used is on or after 1 July 2022 (ie not retrospective to cars purchased before that date unless the vehicle wasn’t used until after 1 July 2022)
4. The car is used by a CURRENT employee or their associates (such as family members); and
5. Luxury Car Tax (LCT) has never been payable on the importation or sale of the car.  This means that for the 2023 financial year, the car needs to have cost less than the luxury car tax threshold for fuel efficient vehicles of $84,916.

(*) Plug-in hybrid electric vehicles from 1 April 2025 onwards:

From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law.  However, the employer can continue to apply the FBT exemption if both of the following requirements are met:

1. Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and
2. You have a financially binding commitment to continue providing the private use of the vehicle on and after 1 April 2025.  This means that if the employer leases a vehicle for an employee for 3 years from 2023 to 2026 the vehicle will be exempt till the lease expires.  Optional extensions on contracts will not qualify.

The following expenses are exempt from FBT if they are provided for an eligible electric car:

•  Registration
•  Insurance
•  Repairs & maintenance including services, tyres, car washing
•  Fuel (ie the cost of electricity to charge & run the vehicle)

Please note that the cost of installing a home charging station is not a car expense associated with providing a car fringe benefit so it won’t be exempt.

Although there is no FBT applicable to these vehicles, employers do need to calculate and report the notional value of the car fringe benefit and if more than $2,000 in an FBT year, they must report that value through the Single Touch Payroll System or on the employee’s payment summary (Reportable Fringe Benefits Amount).  This amount is not taxable to the employee but it needs to be declared in their tax return and it may impact their Medicare Levy Surcharge liability and/or Government benefits/obligations (eg Centrelink).

If you would like to discuss how your business can assist employees to purchase, finance & salary package an electric vehicle please give our team a call.