First, the Electric Vehicle must be a “car” as the FBT law defines it.
A “car” is:
Electric utes over 1 tonne are not “cars” and are therefore not exempt under these rules – there are special FBT rules for utes and don’t assume they are always exempt from FBT.
Motorcycles, scooters and similar vehicles are not “cars.”
Second, the car must be a Zero or low emissions vehicle that is:
From 1 April 2025, a plug-in hybrid EV will not be considered a zero or low emissions vehicle under these rules unless:
The electric vehicle must be held and used for the FIRST time on or after 1 July 2022.
It cannot be an existing EV you purchased before that date or supplied to an employee before that date.
However, it is okay to have ordered a vehicle before 1 July 2022 and have it delivered after that date.
The car benefit must be provided to a person who receives or is entitled to receive salary or wages in your business:
Careful – buying a car for yourself as a shareholder of your company (but not as an employee) may result in falling into the Div7A trap!
An EV is held where it is:
An EV is not “held” where it is owned by the employee. However, the exemption is available where the car fringe benefit is provided under a salary packaging arrangement between employer and employee (say, in the case of a novated lease).
If the EV was subject to Luxury Car Tax at any time, it is not exempt. The LCT threshold for Fuel-efficient vehicles for the 2023FY is $84,916.
You need to do some research as there is no exemption if:
So, you must research its history and assess whether it would have been subject to LCT if purchased new. This can be a tricky process as some EVs hover close to the LCT threshold, and the threshold includes additional costs such as dealer charges and added options.
The car expense benefits that go with the car benefit are exempt. These are:
That depends.
Over time, all rechargeable batteries will inevitably lose capacity, a phenomenon known as battery degradation. Typically, you won’t have to replace the battery for at least 8-10 years. However, the current cost of a new battery pack can be expensive, ranging between $12-20K.
Technology is rapidly advancing in energy density and long-term battery health. This means that newer batteries may offer more driving range, making your current EV more relevant for a longer time.
The government will start reviewing the EV FBT exemption rules by December 2025 and complete a report by mid 2027 on the uptake of EV’s and efficacy of the policy. This gives them an out if it becomes too costly or just isn’t popular.
There is also a chance the rules are wound back after a change in government within the next 2 years, but grandfathering rules may apply to existing car benefits.
The ATO fact sheet does not provide specific guidance on electricity charging costs incurred by the employee (i.e, charging at their home) and reimbursed by the employer. But electricity to charge and run the electric vehicle is likely to qualify for the car expense exemption – as long as the EV being charged is provided as a car benefit.
The ATO recently released a draft guideline, PCG 2023/D1, to assist determining the cost of charging electric cars at home. As of April 1st, 2022, the ATO has established a rate of 4.20 cents per km. The guideline outlines how employers can calculate the reportable fringe benefit (RFBA) of an employee’s electric vehicle and why it’s important to consider why an employee driving an exempt EV may need to maintain a log book.
No. The purchase of an electric charging station is not a car expense and therefore not exempt from FBT. If you give your employee an electric charging station or reimburse them for it, it would be taxed as a property or expense fringe benefit.
It would need to be separately identified to ensure the FBT concession does not apply to the portion attributable to the charging station.
Business accessories you add after you bought the EV are exempt. An example would be a GPS fitted in a salesperson’s car.
Non-business accessories added after the initial purchase of the EV are not exempt and are added to the base value of the car for working out the taxable value. Examples include:
So, non-exempt electric vehicle benefits related to the EV are taxable fringe benefits. You will be required to work out the taxable value of the benefit and then potentially pay FBT.
You must report the value of car benefits arising from the private use of electric vehicles by your employees even though they may be exempt vehicles. The grossed up taxable value is included in the employee’s annual wages summary and included in their tax return for income tests and thresholds relating to:
The administration of working out what the FBT value of the EV is still required even if the exemption can be claimed.
If you have bought or are considering buying an EV for your employees or would like to salary package an EV, contact us for specific advice on your situation. As one of the leading accounting firms in Sydney, we can provide you with the latest financial advice related to electric vehicles.
Disclaimer: This information is of a general nature only. It is not intended to constitute professional advice and cannot be relied upon by any party as advice. Inline Partners accepts no responsibility for any loss or damage suffered by any party in relying on this information.