FBT Exemption For Electric Vehicles

Electric vehicles are set to become more affordable for both households and businesses after the government sealed a deal with crossbench Senators on legislation to exempt low and zero emission cars from fringe benefits tax (FBT).

The new law introduces an electric car discount in the form of an FBT exemption. This allows for car fringe benefits comprising the use or availability for use of an eligible car that is a zero or low emissions vehicle to be exempt from FBT. Specifically, a car benefit will be an exempt benefit fora year of tax if:

• the car is a zero or low emissions vehicle (note the scheme has been extended to include plug-in electric and internal combustion hybrids until 1April 2025)
• the value of the car at the first retail sale was below the luxury car tax threshold for fuel efficient vehicles (currently $84,916), and
• the car is first held and used on or after 1 July 2022

The FBT exemption would mean a customer with a gross income of $95,000 using a 36-monthnovated lease through their employer to purchase a 2022 Tesla model Y would see their take-home pay reduced by $1,364 a month, compared to $1,863under the current rules, according to Inside Edge. Over the course of the lease, the total saving to the buyer would be $29,451 compared to a standard car loan.

Employers are the other big winners from the changes, which will remove the FBT liability on company-owned electric vehicles provided as part of a salary package for personal use by employees.

Under the earlier example, a Tesla valued at $64,000currently results in a company FBT charge of around$12,500, according to Treasury calculations. This would be reduced to nil where the conditions above are met.

Car fringe benefits that are exempt from FBT will continue to be included in the employee’s individual fringe benefits amount for the purposes of determining the employee’s reportable fringe benefits amount for each FBT year in which the exempt benefit is provided.