EV Novated Lease Requirements
Important things to note about the Australian Government’s employer FBT exemption legislation for Electric Vehicles EV vehicles.
Eligible vehicle criteria
Vehicles that are Battery Electric (BEV), Hydrogen Fuel Cell (FCEV) or Plug In Hybrid (PHEV).
Must be deemed a ‘car’ for Fringe Benefit purposes (under 1 tonne payload and 8 seats or less).
New and Used vehicles that are first held and used on or after 1 July 2022 (first ever registered after 01/07/2022).
Must be provided to a current employee.
The vehicle must never have sustained Luxury Car Tax (LCT). There must be evidence that the supply from the EV vendor to Toyota Fleet Management TFM fell within the Financial Years since legislated and did not exceed the LCT threshold for fuel-efficient cars for the corresponding year when sold new.
| Financial Year | LCT Threshold for Fuel Efficient Vehicles (Inc GST excludes Rego, CTP and Stamp Duty) |
|---|---|
| FY23 (July 22 to Jun 23) | $84,916 |
| FY24 (July 23 to Jun 24) | $89,332 |
| FY25 (July 24 to Jun 25) | $91,387 |
In determining whether the threshold is exceeded, all options, accessories and dealer delivery must be included (excluding On Road/Government Charges)
PHEV cars are subject to a transition rule under which employer FBT exemption will cease if first commitment to application and use of the PHEV car is on or after 1 April 2025. If PHEV delivery and lease start date is after 31 March 2025, the PHEV cannot obtain employer FBT exemption, irrespective that other conditions may have been met. Employers and employees should therefore closely monitor the position of PHEVs on order with dealers to ensure actual delivery will be achieved on or before 31 March 2025.
How could this Bill impact you?
The employer FBT exemption legislation for EVs should result in material packaging gains for an employee, as compensation costs to the employer for the FBT exempt novated lease is entirely pre-tax and thus is more income tax effective.
For employees of exempt or rebatable employers, this employer FBT exemption, will not impact or utilise the per employee cap and therefore the cap can be used for other fringe benefits.
Employee’s Reportable Fringe Benefits Amount (RFBA) for an FBT year will still be required to be determined and reported, as if there was no employer FBT exemption.
While the RFBA is not personal taxable income to the employee, the total RFBA from all employment is taken into account when determining the eligibility for certain government benefits, concessions, and calculating various payments. Examples where RFBA amounts may have potential adverse impacts to an individual and their family include: changes to HECS/HELP debt repayments, Child Care Subsidies, Family Tax Benefits, Child Support obligations etc. A full list can be found at this link on the ATO website. The RFBA will be shown on the employee’s income statement through ATO online services in myGov.
Things to consider
This information provided is of general nature and does not take into account your personal needs and financial circumstances. Nothing in this correspondence constitutes or should be considered to constitute legal, taxation or financial advice. TFM recommends that you seek independent advice from a qualified legal, financial or tax advisor, who can advise you about your personal circumstances.
