Electric Vehicles: FBT Exemption

In a move to promote the adoption of electric vehicles (EVs) and reduce carbon emissions, the Australian government enacted the Treasury Laws Amendment (Electric Car Discount) Bill 2022. This legislation provides a Fringe Benefits Tax (FBT) exemption for eligible electric vehicles, making them more affordable for businesses and employees.

The government will review this exemption after three years to see if more people are using electric cars. The review will be completed by mid-2027 by the Australian Taxation Office (ATO).

To qualify for the FBT exemption, three conditions must be met:

• The car benefit must be given to an employee during the tax year.
• The car must be a zero or low-emissions vehicle when the benefit is provided.
• The car’s value at its first retail sale must be below a certain amount (currently $84,916 for fuel-efficient cars in the 2022-23 income year).

A zero or low-emissions vehicle can be a battery electric vehicle, a hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle.

Starting from April 1, 2025, plug-in hybrid electric vehicles will no longer be considered zero or low-emissions vehicles for FBT purposes. However, if the vehicle was already exempt before that date and there is a commitment to continue providing private use, the exemption will still apply.

The exemption only applies if both of these conditions are met:

• The person started using the car after July 1, 2022.
• The person started holding the car after July 1, 2022.

The FBT exemption also covers associated expenses for the eligible car, such as registration, insurance, repairs, maintenance, and fuel (including electricity).

Other things to consider:

• The FBT exemption includes benefits provided through salary packaging.
• There is a limit on the value of the car ($64,741 for 2022-23) for depreciation purposes.
• The value of the electric car benefit will be added to the employee’s reportable fringe benefit amount each FBT year.

This initiative supports the government’s goal of reducing pollution from transportation. By providing tax incentives and benefits, the government encourages the use of zero or low-emissions vehicles. As more businesses and employees take advantage of this FBT exemption, we can expect a faster transition to a cleaner and more sustainable future.