There’s been a lot of talk about a bill introduced into parliament which proposes to remove the Fringe Benefits Tax (FBT) payable by employers on electric vehicles (EVs) provided to employees for private use. While this is great news for both employers and employees, BlueRock Director of Tax Advisory, Ani Tuna, explains some things to consider before you race out and excitedly buy that new EV.
Before you dive in, whether you're an individual, an employer, or an employee, it's important to have a sound understanding of Fringe Benefits Tax (FBT) and what it means for your unique situation and circumstances. Find out what’s new for fringe benefits tax in 2022, or keep reading to learn about the potential new EV FBT exemption.
Know the Retail Price Limit for the EV FBT Exemption
The EV FBT exemption will apply only where the retail value of the car is less than the luxury car tax threshold for fuel-efficient cars. This is $84,916 for the 2022-23 income year. This threshold is GST inclusive and is the total cost of the car, plus any additions and modifications.
Meet Specific Criteria to Ensure a FBT Exempt Car
According to the Federal Government, if a $50,000 model is provided through employment arrangements, Labor’s fringe benefits tax exemption will save employers up to $9,000 a year.
However, as with all fringe benefits tax on cars, it only applies to vehicles that meet specific criteria. Specifically, under the Labor EV FBT policy, the car must be battery electric, hydrogen fuel cell or a plug-in hybrid vehicle. These car types are all defined, so take care to ensure a car qualifies before you buy it.
Don’t Forget Reportable Fringe Benefit Amounts
Car fringe benefits, although exempt from FBT, must be included in determining employee's 'reportable fringe benefits amount'. This may impact the employee's:
- Entitlement to Private Health Insurance Rebate
- Lability for Medicare levy surcharge
- Liability for additional tax on concessional superannuation contributions
- Entitlements to various tax offsets
- Entitlements to various Government assistance programs.
There’s No Provision of Ancillary Benefits
The bill doesn’t contemplate the provision of any ancillary benefits such as the installation of charging stations at the employee’s home or workplace. It's likely that these benefits would constitute separate fringe benefits for which an exemption from FBT doesn’t apply. There’s also no agreed methodology for calculating the amount of electricity to charge electric vehicles.
Gifting Is Not Exempt from the Car Fringe Benefits Tax
The EV FBT exemption will apply to 'car fringe benefits' only. The gifting of an electric vehicle would be regarded as a 'property fringe benefit' and therefore not exempt from FBT.
Don’t Get Too Excited. The FBT Exemption for EVs is Not Law Yet!
The bill was introduced into parliament on 27 July 2022 and has since been referred to the Economics Legislation Committee for inquiry and report by 2 September 2022. So, it’s not yet law and should be regarded as a proposed measure only.
If and when the law is enacted, and assuming there are no changes, the exemption will apply to cars that are first held and used on or after 1 July 2022. This includes electric cars ordered prior to 1 July 2022 but not delivered until after that date. A second-hand electric car may also qualify for the exemption, provided that the car was first purchased new on or after 1 July 2022.
Need Advice Around FBT Car Exemptions or Anything Else Tax Related?
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