The Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs) has finally passed but what does it mean exactly?
The Electric Car Discount Bill aims to increase the up-take of electric vehicles and reduce transport emissions. The legislation provides an FBT exemption for eligible cars made available by employers, for employees.
FBT typically applies to any car provided by an employer to an employee, either by a salary sacrifice arrangement in which the employee finances the car through repayments from their pre-tax salary, or by making a company car available for personal use.
To work out the taxable value of a car fringe benefit, use either the statutory formula method (based on what the car cost), or the operating cost method (based on what the car cost to operate).
You can use whichever method leaves you paying the least tax, unless you haven’t kept the log books you need to separate business use from personal use for the operating cost method, then you have to use the statutory formula method.
Stopping the FBT applicable to EVs means, for a qualifying vehicle valued at approximately $50,000 this will equate to a $9,000 benefit to an employer or a $4,7000 benefit to an employee which uses a salary sacrifice arrangement.
A snapshot of what does and does not qualify
- The exemption covers low and zero emission vehicles with a value under the luxury car tax threshold of fuel efficient cars ($84,916) including:
- Battery electric vehicles (BEVs)
- Hydrogen fuel cell electric vehicles (FCEVs)
- Plug-in hybrid electric vehicles*
- Second hand cars may qualify if their first retail sale was on or after 1st July 2022.
- Salary-packaged cars qualify in the same way as other employer-provided cars.
- Vehicles not defined as ‘cars’ for FBT purposes or designed to carry one tonne or more, nine passengers or more, do not qualify.
*If the vehicle has an internal combustion engine it will qualify only if it can be recharged by an off-vehicle power source
When is the exemption coming into effect?
The FBT exemption applies retrospectively from 1st July 2022 to cars first held (aka the first retail sale) by a person on 1st July 2022 or later. Qualifying cars ordered prior to 1st July 2022 will qualify if delivery did not take place until 1st July 2022 or later.
A notable amendment made to the originally tabled bill is that a plug-in hybrid electric vehicle will not be exempt from FBT after 1st April 2025. Pre-existing arrangements with these cars will be able to continue as FBT exempt until the completion of the particular arrangement.
Private use of qualifying cars will still result in reportable fringe benefits for employees, including those of not-for-profit employers. This means that employers will still be required to undertake FBT related calculations for these vehicles.
Additional concessions by the states
ACT – Stamp duty exemption on new zero emission vehicles, plus up to two years’ free registration on new or second hand zero emission vehicles registered between 24th may 2021 and before 30th June 2024).
NSW – Stamp duty reimbursement on purchases of new or used full battery electric vehicles and hydrogen fuel cell electric vehicles with a dutiable value of up to and including $78,000. A refund can be applied for a vehicle registered between 1st September 2021 and 14th August 2022 with the reduction automatically applied from 15th August 2022.
NT– Free registration access for new and existing vehicles (plug-in electric vehicles – hybrid plug-in and battery) from 1st July 2022 until 30th June 2027, plus a stamp duty concession of up to $1,500 on the first $50,000 of the market/sale value of the car and 3% thereafter.
QLD – Discounted registration fees electric and hydrogen vehicles, plus a limited $3,000 rebate for new and eligible zero emission vehicles with a purchase price/dutiable value up to $58,000 inc. GST on or after 16th March 2022.
SA – Limited $3,000 subsidy pulse a 3-year registration exemption on qualifying new battery electric and hydrogen fuel cell vehicles first registered from 28th October 2021.
TAS – No stamp duty on light electric or hydrogen fuel cell motor vehicles (including motorcycles) from 1st July 2021 until 30th June 2023.
VIC – Limited $3,000 subsidy for new eligible zero emission vehicles purchased on or after 2nd May 2021, plus stamp duty for ‘green passenger cars’ set at one rate, regardless of value – $8.40 per $200 or part thereof. Zero emission vehicles will receive a $100 annual registration concession although they are also subject to a per kilometre road user charge.
WA – Rebate of $3,500 on the purchase of a new zero emission hydrogen fuel cell or battery light vehicle purchased on or after 10th May 2022 and with a value of up to $70,000.
Beyond Advisors offers professional advice, including fringe benefit tax exemptions or salary sacrifice packaging for SMEs. Get in touch with our helpful team today.