The Government has recently passed legislation to treat as exempt from Fringe Benefits Tax (FBT) any benefits associated with the provision of electric cars. This exemption will operate from 1 July 2022 provided the electric car meets the following eligibility criteria:
- The car is a zero or low emissions vehicle, requiring it to be:
- a battery electric vehicle, hydrogen fuel cell electric vehicle, or plug-in hybrid electric vehicle, and;
- designed to carry a load of less than one tonne and fewer than 9 passengers.
- The first time the electric car is owned, leased or otherwise made available for use is on or after 1 July 2022.
- The car is used by a current employee (or their associate/s)
- Luxury Car Tax (LCT) has never been payable on the car. LCT is payable on vehicles above the LCT threshold at the time of purchase/sale. The LCT threshold for fuel efficient vehicles in the 2023 financial year is $84,916 (inclusive of GST) and in the 2024 financial year is $89,332 (inclusive of GST).
If your electric car meets the above criteria, then the associated expenses to that car will be exempt from FBT from 1 July 2022. Associated expenses include registration, insurance, repairs and maintenance of the vehicle and fuel (or the electricity to charge and run the car).
The cost of home charging stations that are paid by the employer have been specifically identified as not being considered a car expense under this exemption. If you provide compensation to an employee in relation to electric charging stations or associated expenditure you should seek guidance as to whether a fringe benefit exists and determine any applicable taxation obligations associated with those benefits.
It is important to note that motorcycles and scooters are not considered cars for FBT purposes and therefore are not subject to this exemption, even if they are electric.
The Government is expected to review this legislation over the coming years to evaluate the take up of electric cars and determine to what extent the exemption will continue.
As always, we are here to support you with all of your FBT obligations. To book a consultation with one of our FBT specialists, contact us at (03) 5221 6399 or firstname.lastname@example.org.
This article was written by Tax & Business Services Senior Accountant Tamara Wright.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.