Electric Vehicle FBT Exemption
The Fringe Benefits Tax (FBT) is a tax imposed by the Australian Government on certain benefits that employers provide to their employees, their employees' family members or other associates. With the 2023 FBT year just behind us, it's time for employers to begin the 2023 FBT return process which is due to be lodged with the Australian Taxation Office (ATO) by 22 May 2023 (given 21 May falls on a Sunday) however if you are lodging electronically through a registered tax agent the lodgement due date will be extended to 26 June 2023.
The Australian Government announced in the 2022 Federal Budget an exemption on FBT for the private use of eligible electric vehicles (EV). As a result, the 2022/23 FBT year will be the first year which the EV exemption may provide a benefit to employers. Broadly, the rules allow for an exemption on FBT where employers provide their employees with an EV that is used by an employee for private use under the following criteria:
1. The car is a “zero or low emissions vehicle” 2. The first time the car is both held and used is after 1 July 2022 3. The car is used by a current employee or their associates (such as family members) 4. Luxury Car Tax (LCT) for fuel-efficient cars does not apply to the vehicle
For the EV to be classified as a “zero or low emissions” vehicle, it must satisfy the following:
1. It is a battery, hydrogen fuel cell or plug-in hybrid electric vehicle 2. It is a car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver)
If the benefit meets the above criteria, then the cost of the benefit, including associated expenses such as registration, insurance, repairs, and electricity used to charge the car, should be exempt from FBT. However, an important limitation to the exemption is home charging stations are not exempt as this is not considered an expense associated with providing a car fringe benefit.
Employers should note that the definition of a low emissions vehicle may change over time, and they should check the current definition with the ATO before claiming any exemptions or concessions.
There could also be tax savings for employees who salary packaging with electric vehicles. The savings arise due to a reduction in the amount of the salary packaged amount resulting in more take home pay for the employee.
If you would like to know more about the FBT EV exemption and how it may apply to your business or individual circumstances, get in touch with us today.