The fringe benefits tax (FBT) exemption on select electric vehicles has plenty of upsides for EV buyers, but there are rules you need to know.
From 1 July 2022, employers do not pay FBT on eligible electric cars and associated car expenses.
Subsequently, if you are eligible and can purchase an electric car like a Tesla Model 3 ($65,500 before on-road costs), you won’t have to cover the cost of any FBT incurred.
Additionally, associated expenses like registration, insurance, repairs, maintenance, fuel, or electricity costs for charging are exempt from incurring FBT if provided for an eligible electric car.
You do not pay FBT if you provide private use of an electric car that meets all the following conditions:
- the car is a zero or low-emissions vehicle;
- the first time the car is both held and used is on or after 1 July 2022;
- the vehicle is operated by a current employee or associates (such as family members) and
- luxury car tax (LCT) has never been payable on the importation or sale of the car.
Benefits provided under a salary packaging arrangement are also included in the exemption.
Low and zero-emission cars.
Low and zero-emission cars are qualified as:
- Battery electric vehicles
- Hydrogen fuel cell electric vehicles
- Plug-in hybrid electric vehicles. (This doesn’t include all hybrid vehicles. To qualify, the car needs to be a ‘plug-in’. A vehicle with an internal combustion engine will not meet requirements unless it can be fuelled by a battery that an off-vehicle power source can recharge.)
The car was first held and used on or after 1 July 2022.
If the exemption conditions are met, an electric car ordered before 1 July 2022 but not delivered until after 1 July 2022 would be eligible (even if an employer acquired legal title to the vehicle before 1 July 2022). However, a car delivered to you before 1 July 2022 would not qualify.
A second-hand electric car may qualify for the exemption, provided that the vehicle was first purchased new on or after 1 July 2022.
The value is below the luxury car tax threshold for fuel-efficient vehicles.
The car’s value at the first retail sale must be below the luxury car tax threshold ($84,916 in 2022-23) for fuel-efficient vehicles. The luxury car tax threshold generally includes GST and customs duty but excludes other items such as service plans, extended warranties, stamp duty and registration.
Who cannot access the FBT exemption?
By its nature, this FBT exemption only applies when an employer provides a car to an employee.
Partners and sole traders cannot access the exemption benefits as they are not business employees. When it comes to a trust’s beneficiaries and company shareholders, it will be essential to determine whether the help will be provided to them in their capacity as an employee or directors of the entity.
A home charging station is not a car expense associated with providing a fringe benefit for electric cars.
However, it may be a property fringe or expense payment fringe benefit.
Private buyers paying out of their pocket for an electric car would not benefit from the scheme.