Electric Cars exempt from Fringe Benefits Tax

The Fringe Benefits Tax (FBT) exemption on selected electric vehicles has plenty of upside for employers, however it’s important to have a sound understanding of this exemption.

So, we take a look at how it can benefit employers and employees.

What is the FBT?

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages, and the Fringe Benefits Tax is a tax on this benefit that is levied on employers, but often passed on to employees who lease their car through work via a novated lease.

What does the FBT exemption mean for electric car buyers?

In June 2022, the Government announced the removal of the Fringe Benefit Tax (FBT) to employers providing electric vehicles for staff to use.

The objective of the exemption is to encourage a greater take up of electric cars by making them more affordable and to reduce Australia’s carbon emissions from the transport sector.

Additionally, associated expenses like registration, insurance, repairs, and electricity costs for charging are also exempt from incurring FBT if provided for an eligible electric car.

This both provides a financial incentive for employees to purchase electric cars under a novated lease, and slashes thousands of dollars off the FBT bill on electric cars operated by fleets and company-car drivers.

However, private buyers who pay out of their own pocket for an electric car would not benefit from the scheme as there is no FBT in this situation.

Which electric cars are eligible for the FBT exemption?

Before this legislation was introduced, electric cars were considered the same as any other motor vehicle. Therefore, when an EV was placed on a novated lease under an employee’s salary package, it attracted FBT.

Now however, any zero or low emission vehicles such as electric vehicles, hydrogen fuel cell electric vehicles and plug-in electric vehicles have been rewarded with an FBT exclusion.

The car also needs to be under the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles, which for the 2022/23 financial year is $84,916 (GST inclusive). This threshold is GST inclusive and is the total cost of the car, plus any additions and modifications.

To qualify, an electric car must be used for the first time on or after 1 July 2022 – even if it is held before this date.
It is also important to note that any petrol hybrid cars, large vehicles (9 passengers or more) or any luxury electric cars will NOT qualify for the exemption.

Get in Touch

To learn more about this exemption, and for assistance with novated leasing for your business or your staff, please get in touch!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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