As part of the Government’s green initiative & to increase the uptake of Electric Vehicle’s, they have announced an exemption for FBT on electric cars and associated car expenses from 01 July 2022.

You will remember from our previous article (see link below) that Fringe Benefits Tax is another tax that applies to non cash benefits paid to employees or their associates.

Insights – Fringe Benefits tax – What, why, when and who? – Alto (altoadvisors.com.au)

Generally FBT is levied on the private use of a company owned car and can be taxed at up to 47%.

 

Due to the value of the savings that can be made by a business that could have to pay significant FBT on private use of a regular motor vehicle, this exemption has been touted a game changer, however we are yet to see a significant uptake in EV purchases from our clients at this time.

 

Who is Eligible?

A business must meet ALL of the following conditions to meet the FBT exemption criteria:

1. The car is a zero or low emissions vehicle.
2. The first time the car is both held and used is on or after 1 July 2022.
3. The car is used by an employee, director, beneficiary, or their associates
4. Luxury car tax (LCT) has never been payable on the importation or sale of the car.

We will now delve deeper into each of these requirements as it is important to tick all of the boxes to keep the ATO happy.

 

1.What is a ZERO EMISSIONS CAR?

A vehicle is a zero or low emissions vehicle if it satisfies BOTH of these conditions:

• Battery electric vehicle,
• Hydrogen fuel cell electric vehicle, or
• Plug-in-hybrid electric vehicle – Note that hybrid vehicle exemption will be phased out from 01 April 2025.

AND

It is a car designed to carry a load of:

• Less than 1 tonne and
• Fewer than 9 passengers (including the driver).

You should note that Motorcycles and Scooters are NOT CARS for FBT purposes.

 

2.What does HELD AND USED mean?

The electric car must be owned & used for the first time on or after 1 July 2022.

This does not mean that you cant buy a second hand EV- it just means that you need to be able to determine when the ORIGINAL owner of the car first bought and used it – and take this into consideration.

 

3.The car is used by an  EMPLOYEE, DIRECTOR, BENEFICIARY OR THEIR ASSOCIATES 

As for most items captured by the FBT rules, you will need to consider how this applies for

• Anyone employed on payroll
• A Director of the company – even if you are not paying yourself through payroll
• Someone who receives a distribution of income from the trust that owns the car
• The spouse or family member of any of the above.

 

4.LUXURY CAR TAX (LCT)

Luxury car tax is another tax which is levied on cars that have GST inclusive value above the LCT threshold.

The threshold can change each year but for the 2024 financial year the threshold is $89,332.

To be eligible for the exemption the cost of the car must have been BELOW the LCT threshold at the time it is first sold in retail sale or any subsequent sale.

This means that if you purchase a second-hand EV that is below the threshold, you will still need to be able to check what the car initially cost for all previous owners to determine if it was subject to LCT at any time in the past.

 

Are the running costs of the motor vehicle exempt too?

If you have ticked all the boxes above and determined that your EV is eligible for the FBT exemption, then yes, the running costs of the vehicle will be exempt from the tax too.

The ATO have confirmed that the below expenses will also be exempt from FBT in relation to Electric Vehicles

• Registration & Insurance
• Lease Payments
• Interest & Depreciation (where purchased under Chattel Mortgage or Hire Purchase)
• Repairs or maintenance
• Fuel (including electricity to charge and run electric cars).

 

 What if i need to replace the battery?

Because the cost of these batteries can be up to $20,000 for some electric vehicles compared to $400 you might pay for a normal car battery,  this is a great question. If the battery is a straight replacement then yes it would be considered a car expense & would receive the FBT exemption, if it is an upgrade/improvement then it would not be classified as a car expense and could be subject to FBT for any private usage.

 

What about the Home Charging Station?

Unfortunately, a home charging station is not considered a car expense associated with a car fringe benefit for electric cars.

Therefore the exemption would not extend to the purchase of the charging station.  Where the charging station is owned by the business and the car is used for private use, the FBT implications would need to be considered and decisions made about who should purchase the charging station.

 

So that means I don’t need to keep a logbook- Right?

Unfortunately the fact that the company is exempt from paying FBT does not reduce the record keeping that the company is required to do for any vehicle owned by the company.

Employers will still need to prepare the relevant private use and FBT calculations for each electric vehicle because the private use of a car is still considered a Reportable Employee Benefit.

These calculations are required to be recorded on their employees’ individual payments summaries for STP purposes and although the amount is not added to an employee’s taxable income to determine Income tax & Medicare levy liabilities it is added to an employee’s taxable income for calculating Medicare Levy Surcharge, and other Income tests for family assistance, child support, HELP Debt and Div 293 Super.

So the driver should still keep a look book for 12 weeks to determine their work related use percentage, and provide this to their employer so they can calculate the correct amounts that need to be reported.

 

How Can Alto Help?

If you are thinking of purchasing a new or used Electric vehicle please contact Alto and speak to an accountant, as there is a lot to consider regarding FBT with the purchase of your EV, particularly around ensuring your eligibility before you make the purchase.

 

Author: Robyne Dole