To encourage a greater take up of electric cars, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 was enacted in December 2022. If you want to provide electric vehicles to your employees for private use while being exempt from Fringe Benefits Tax (FBT), keep reading!
The provision of an electric vehicle (EV) to a current employee (or associate) for their private use may now be exempt from FBT . While this is an exciting development, it’s important to take a close look at the eligibility requirements to ensure you aren’t unintentionally running up an FBT bill. Here’s everything you need to know about FBT and electric vehicles.
FBT Electric Vehicle Eligibility
To be eligible for the FBT exemption, a car must be a zero or low emissions vehicle, specifically:
- Battery electric vehicle
- Hydrogen fuel cell electric vehicle
- Plug-in hybrid vehicle (no longer eligible from 1 April 2025)
The electric car must also be used for the first time on or after 1 July 2022, even if it is held before that date. You must identify when the first person ever used the EV, not just when the employer first held the EV. While this is fairly straightforward with new EVs, it can cause some complexity in the case of second-hand EVs.
FBT Electric Vehicle Value
The value of the EV must be below the luxury car tax (LCT) threshold for fuel efficient vehicles at the time the EV is first sold in a retail sale and any subsequent sales. The LCT threshold for fuel efficient vehicles is $84,916 in 2022-23.
Again, this might add some complexity when considering a second-hand EV. The ATO has confirmed that where previous sales information is unavailable, it’d be reasonable to look up the RRP of the car’s make and model to determine whether any LCT applied previously.
EV Charging Stations and FBT
Where a charging station is provided on an employer’s business premises, it will be exempt from FBT.
However, if an employee is provided with (or reimbursed for) an electric charging station at their home, or provided with other accessories such as a charging cord, this will be subject to FBT. If home charging infrastructure is provided as part of a lease arrangement, its costs must be separately identified so that concessional treatment (i.e. FBT exemption) isn’t incorrectly applied to the infrastructure.
EV FBT Associated Benefits
These associated benefits arising from specific car expenses provided with EVs are also exempt from FBT:
- Registration and road user charges (including annual charge for EVs in Victoria)
- Insurance
- Repairs and maintenance
- Fuel (including electricity to charge and run electric vehicles)
The ATO has released draft guidance , providing the option to apply a fixed-rate of 4.2 cents per km to calculate electricity costs from charging an EV. The fixed rate can be applied to the EV’s total kilometres travelled during the FBT year to determine the FBT exempt amount of the electricity cost. Employers must meet specific conditions to use the rate and cannot use the rate for plug-in hybrid vehicles.
Reportable Fringe Benefit Amount
The taxable value of any EV benefits (not including associated car expense benefits) still need to be calculated for the purposes of working out if an employee has a reportable fringe benefits amount - even if the EV benefit itself is exempt from FBT! However, where the EV is a pooled or shared car, a reportable fringe benefit amount will not arise.
Talk to a Tax Expert About All Things EVs & FBT
If you'd like to learn more about reducing your FBT bill (whether that involves EVs or not) get in touch with our accounting team today for a free consultation .
