Electric Car FBT Exemption: What Do You Need to Know?
Earlier this month, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 passed the House of Representatives and went before the Senate. It is expected that this Bill will pass through the Senate and become law when the Senate next sits.
If passed, this Bill will deliver an exemption to impacted employers and employees from the Fringe Benefits Tax (FBT) which normally would arise upon the private use of select electric vehicles, providing momentum towards Australia’s electric vehicle integration.
Read on to find out more about this Bill and how it would apply to your business or your job.
What vehicles are included in the exemption?
For the car to be eligible for the exemption it must:
- Be considered a car under the current FBT laws (i.e., so motorbikes and other similar vehicles are excluded)
- Use one or more electric motors for propulsion, and
- Be fuelled by either an off-vehicle electric power source, a battery, an electric generator, a hydrogen fuel cell, or a combination of these mechanisms
That is, the vehicle must be classified as a ‘zero or low emissions vehicle’, which includes a battery electric vehicle, a hydrogen fuel cell electric vehicle, and a plug-in hybrid electric vehicle.
When must the vehicle be purchased?
To be eligible for the exemption, the car must be first held and used on or after 1 July 2022.
A car ordered prior to 1 July 2022 but delivered after 1 July 2022 will fall within the exemption. Additionally, provided the car was originally purchased on or after 1 July 2022, a second-hand electric vehicle also may be eligible.
What is the cost threshold for eligible vehicles?
The value of the vehicle at first retail sale must be below the luxury car tax threshold for fuel efficient cars. For the current financial year (2022-2023), this threshold is currently $84,916.
Are reportable FBT and salary packing arrangements affected?
When the exemption applies, the car fringe benefit provided will still be included in the calculation of an employee’s reportable fringe benefits amount. Therefore, even though it is exempt from FBT, the reportable fringe benefits amount relevant to every impacted employee still will need to be calculated and reported to the ATO annually through Single Touch Payroll (STP).
Additionally, the exemption will be available for eligible electric car fringe benefits provided under a salary sacrifice agreement.
We are excited to see incentives in place to encourage more electric vehicles on our road and support a greener Australia.
If you would like further information, please call or click to discuss with a Macro Group Team Member.
The Macro Group Team
Published on 20 September 2022