Updated March 2025

Are you considering adding electric vehicles to your business fleet? Understanding the fringe benefits tax (FBT) exemption for electric cars could save your business significant costs while supporting your sustainability goals.

In 2022, the Australian Government introduced legislation to exempt certain electric cars from FBT, making them a more attractive option for employers. Here’s what you need to know about this FBT exemption.

What is the electric cars FBT exemption?

Under this legislation, from 1 July 2022, benefits associated with providing eligible electric cars to employees are exempt from FBT. This includes not only the car itself but also most associated running costs.

Which vehicles qualify for the exemption?

To be eligible for the FBT exemption, an electric car must meet all the following criteria:

  • Be a zero or low-emissions vehicle, specifically:
    1. A battery electric vehicle or hydrogen fuel cell electric vehicle
    2. Designed to carry a load of less than one tonne and fewer than 9 passengers
  • First owned, leased or made available for use on or after 1 July 2022
  • Used by a current employee (or their associate/s)
  • Never had luxury car tax* (LCT) payable on it.

*Luxury car tax is payable on vehicles above the LCT threshold at the time of purchase/sale. The LCT threshold for fuel-efficient vehicles in the 2024 financial year is $89,332, and $1,387 in the 2025 financial year is $91,387 (inclusive of GST).

What expenses are covered by the FBT electric car exemption?

When your electric car meets all the eligibility requirements, these associated expenses are also exempt from FBT:

  • Vehicle registration
  • Insurance premiums
  • Repairs and maintenance
  • Electricity costs for charging the vehicle.

Important considerations

Charging stations:

The cost of home charging stations paid by employers is specifically excluded from this exemption. If you provide compensation to employees for charging stations or related expenditures, you should seek advice to determine whether these benefits are subject to FBT.

Plug-in hybrids:

From 1 April 2025, plug-in hybrid electric vehicles will no longer be considered zero or low-emission vehicles under FBT law, meaning the exemption will cease for them.

Not all electric vehicles qualify for the electric car FBT exemption:

It’s important to note that electric motorcycles and scooters aren’t considered cars for FBT purposes and, therefore, don’t qualify for this exemption, even if they’re electric.

The future of the electric cars FBT exemption

The Government is expected to review this legislation in the coming years to evaluate the uptake of electric vehicles and determine the extent to which the exemption will continue.

Get expert FBT guidance

The ever-evolving FBT obligations can be complex to navigate. At Davidsons, our tax specialists can help you understand how these exemptions apply to your specific situation and ensure you’re making the most of available benefits. To book a consultation, contact us by:

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This article was written by Tax & Business Services Senior Accountant Tamara Wright.

Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.