Electric Vehicles: FBT Exemption Update
Drivers who are interested in purchasing a Plug-In Hybrid Electric Vehicle (PHEV), have until 1 April 2025 to take advantage of the Fringe Benefits Tax (FBT) exemption. After this date an PHEV will no longer be considered a zero or low emissions vehicle under FBT law, making them ineligible for this tax benefit.
Read on to find out how this could impact you.
Understanding the Electric Car Discount Bill and upcoming changes
The changes to the FBT exemption for PHEVs are part of the Australian Government’s broader strategy to reduce carbon emissions and encourage the transition to fully electric vehicles (EVs). PHEVs, while offering lower emissions than traditional petrol or diesel vehicles still rely on fossil fuels. The government is aiming to phase out incentives for vehicles that aren’t fully electric to align with its environmental goals.
Despite the upcoming changes, there are conditions where the FBT exemption for PHEVs still applies:
- Use of the plug-in hybrid electric vehicle was exempt before, 1 April 2025.
- You have a financially binding commitment to continue providing private use of the vehicle on and after, 1 April 2025.
What is a commitment?
A commitment is made when there is a binding obligation to complete a transaction and it cannot be withdrawn. To qualify as a commitment, it must be, financially binding on one or more parties involved and involve the private use or the availability for private use of a vehicle by an employee or their associate. For example, an employer enters a commitment when they agree to purchase or lease a car, including through a novated lease arrangement.
Please note, certain changes to existing commitments can create a new commitment, which may cause the employer to lose eligibility for the FBT exemption from that point forward, these changes include:
- Optional extensions to the agreement
- Interruptions in novation agreements
- Changes to financial obligations
- Change of employer
Understanding the implications of these changes is crucial for businesses looking to maximise their tax benefits while remaining compliant with evolving regulations.
If you have any questions about these upcoming changes or need advice tailored to your specific circumstances, reach out to your Simmons Livingstone advisor at 1800 618 800 or via email at admin@simmonslivingstone.com.au
