What is the FBT Exemption for Electric Vehicles and How Does It Work?

The Federal Government has passed a new bill to apply a Fringe Benefits Tax (FBT) exemption to certain zero or low emission vehicles. Under the pre-existing law, employers who provided a fringe benefit to an employee on an electric car were subject to FBT on the value of the benefit. The Treasury Laws Amendment (Electric Car Discount) Bill 2022 removes the FBT on eligible electric cars provided to employees by employers. This is good news for both employees and the environment. Find out more below.

Who does the FBT exemption for electric vehicles apply to?

The Bill applies to vehicles that meet the following criteria:

• 1. Vehicles that are Battery Electric (BEV) Hydrogen Fuel Cell (FCEV) or Plug In Hybrid (PHEV);
• 2. Must be deemed a ‘car’ for Fringe Benefit purposes;
• 3. First held on or after 1 July 2022;
• 4. Must not exceed the luxury car tax (LCT) threshold for fuel-efficient cars which is $89,332 for the financial year ending 30 June 2023.

It is important to note that, as it stands, the Bill does not include full Hybrid vehicles.

How does the electric vehicles FBT exemption impact me?

The Bill is a win for our customers. By not paying tax on selected electric vehicles up to the value of $89,332, employees save thousands on the overall price of the vehicle.

As explained in a media release by The Hon Chris Bowen MP, Minister for Climate Change and Energy, if an eligible vehicle valued at about $50,000 is provided by an employer, the fringe benefits tax exemption can save the employer up to $9,000 a year. For individuals using a salary sacrifice arrangement to pay for the eligible vehicle, their savings could be up to $4,700 a year. For this reason, we can expect to see higher rates of enquiries for Novated Leasing.

In terms of environmental benefits, the exemption is a wonderful development as it means an increase in low emission vehicles on our roads. The proposed exemption makes good on an election promise made by the Government “to make electric cars cheaper so that more families who want them can afford them, and to reduce emissions”.

How long will the Bill be in effect?

The media release also states that the Bill is set to be reviewed after three years. After this period, the Government will review if there has been increased interest in electric cars, if the Bill should be continued and, in what form.

I’m an employer, do I still need to report FBT?

Yes, even if a vehicle is exempt from FBT, it still needs to be reported for the purposes of determining an employee’s reportable fringe benefits for each FBT year. As this amount is used to calculate various liabilities and entitlements, reporting FBT ensures fairness in the tax and transfer systems.

Can you get electric cars on a Novated Lease?

At TFM, we can finance any Electric Vehicle brand. Our Novated Lease Calculator is your one-stop-shop for a comprehensive breakdown of the costs involved with an electric vehicle on a Novated Lease. Simply enter a few details such as the type of car, your salary and estimated KM per year to calculate your savings.

Whether you’re an employee or an employer, the FBT exemption on electric vehicles benefits both your wallet and the environment in the long run. If you would like further information about the Bill and how it affects you and your fleet, you can make an enquiry here.

Disclaimer:

The information provided by Toyota Fleet Management, a division of Toyota Finance Australia Limited ABN 48 002 435 181, AFSL and Australian Credit Licence 392536, is of a general nature and for your information only. Nothing in this article constitutes or should be considered to constitute legal, taxation or financial advice. Before making a decision about any product or service described, we recommend that you seek independent professional advice such as from your accountant, taxation or financial adviser or lawyer, who can advise you about your personal circumstances and what would be suitable for you.