New FBT exemption for electric vehicles

Summary of the Electric Car discount bill

This bill amends the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to exempt cars that are zero or low emissions vehicles held by the provider and used by or made available for private use of employees from fringe benefits tax (FBT). This exemption applies to battery electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV), or hydrogen fuel cell electric vehicles (FCEV) which are:

1. Below the luxury car tax threshold (LCT) which is $84,916 for the 2022/23 financial year
2. First held for use from 1st July 2022 onwards (so it applies retrospectively)
3. Either tool of trade or a novated lease

Here is some information on what it means for both tool of trade vehicles and novated leases.

Tool of trade vehicles

A fringe benefit is an additional benefit provided to an employee from their employer on top of their usual wage, and the employer is responsible for covering the tax on those extra benefits each year.

If you have an eligible tool of trade vehicle activated on or after 1 July 2022, it will be exempt from this tax.

As an example, removing the tax on these eligible cars could mean an EV valued at about $50,000 could save you up to $9,000 a year per car. This could be a significant saving for your organisation.

Novated leases

Although FBT refers to the tax the employer is responsible for, it ultimately impacts the employee’s taxable income through adjustments made in the salary package.

While the electric car discount will vary depending on individual circumstances, the FBT exemption for EVs will generally mean that salary-sacrificing may be financially attractive compared to other avenues for purchasing an EV, since no FBT will be payable and lease repayments will be made through pre-tax income.

Estimates suggest that there could be savings between $3,000 and $5,000 in income tax each year.

Note: this is calculated using the statutory method with employee contribution.

What are we doing about it?

As one of the leading FMO’s in the EV space, Custom Fleet is working hard in the background to ensure our customers can benefit from this exemption and that the process is smooth.

If you’re looking to transition your fleet or want to know more, reach out to your Relationship Manager or specialist Novated Consultant to find out how you may be able to benefit from the FBT exemption for electric vehicles.

You can also use our contact form to get in touch.

You can read our FAQ’s (66KB, PDF) for further information.

Note: This content is intended to provide general information only and does not consider your personal objectives, circumstances, or financial needs. Taxation considerations are general and based on present and draft taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.