On 29 June 2022, the Government announced a proposal to:
- remove fringe benefits tax (FBT) on eligible electric cars, and
- include the value of these exempt car fringe benefits in the calculation of an employee’s reportable fringe benefits amount.
This measure is now law.
From 1 July 2022, employers will not pay FBT on benefits provided for eligible electric cars and associated car expenses.
The Government will complete a review into this exemption by mid-2027 to consider electric car take-up. We will provide an update when this review begins.
From 1 July 2022, employers do not pay FBT on eligible electric cars and associated car expenses.
You do not pay FBT if you provide private use of an electric car that meets all the following conditions:
- the car is a zero or low emissions vehicle
- the first time the car is both held and used is on or after 1 July 2022
- the car is used by a current employee or their associates (such as family members)
- luxury car tax (LCT) has never been payable on the importation or sale of the car.
Benefits provided under a salary packaging arrangement are included in the exemption.
The government will complete a review into this exemption by mid-2027 to consider electric car take-up. We will provide an update when this review begins.
Zero or low emissions vehicle
A vehicle is a zero or low-emissions vehicle if it satisfies both conditions:
- It is a:
- battery electric vehicle
- hydrogen fuel cell electric vehicle, or
- plug-in hybrid electric vehicle.
- It is a car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).
Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.
Plug-in hybrid electric vehicles – 1 April 2025 onwards
From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low-emissions vehicle under FBT law.
However, you can continue to apply for the exemption if both the following requirements are met:
- 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. For this purpose, any optional extension of the agreement is not considered binding.
Determining if the car was subject to LCT
To be eligible for the exemption, the value of the electric car must be below the LCT threshold for fuel efficient vehicles at the time it is first sold in a retail sale, and in any subsequent sale.
If you purchase an electric car second-hand, you need to determine if it was subject to LCT at any time in the past. Don’t hesitate to get in touch with us at Swan Partners the Professional experienced Tax Accountant in Perth to find out more details and your positions of this option. Our contact number is: 08 61629808