As electric vehicles become more popular and accessible, business owners need to stay informed about how changes to Fringe Benefits Tax [FBT] rules apply to them and their employees.

By choosing the right type of vehicle, understanding the costs involved and ensuring that employees are trained and prepared, employers can take advantage of this exciting new technology and give their business a competitive edge.

 

the benefits of electric vehicles for businesses 

Electric vehicles have several advantages for businesses of all sizes. First and foremost, they offer significantly lower running costs over traditional petrol or diesel vehicles. 

Also employers are beginning to see electric vehicles as the socially responsible choice for employees given the lower carbon footprint than their fossil-fuel-powered counterparts. As they generally produce low or zero emissions, they are also helping businesses meet their sustainability targets. 

 

how will the FBT changes incentivise electric vehicles?

Under the legislation introduced by the Government in 2022, certain zero and low emission vehicles are exempt from FBT.

 

the ‘nuts and bolts’ of it all

As always, the legislation incorporates a few hoops employers will need to jump through in order for the electric vehicle to qualify as exempt for FBT. They are summarised below: 

  • The purchase price of the motor vehicle must be less than the current Luxury Car Tax [LCT] threshold of $89,332 for the 2024 FBT year [including GST] 
  • The motor vehicle must first be held and made available for use after 1 July 2022 
  • Must be a zero or low emissions vehicle, that is: 
    • A battery-operated vehicle 
    • Hydrogen cell fuel vehicle; or
    • A plug-in hybrid electric vehicle 
  • Must be a car for FBT purposes [motorcycles, scooters and some utes do not qualify]

 

 

the end of the road for plug-in hybrids 

The 2024 FBT year will be the last year plug-in hybrids will be eligible to be considered under this exemption. From 1 April 2025 plug-in hybrids will not be considered a zero or low emissions vehicle for FBT purposes.  

 

bonus stage

The legislation also provides that expenses associated with exempt electric vehicles are also not subject to FBT, including registration, insurance, servicing + repairs and fuel. 

the tricks and traps

Seemingly as with all Australian tax legislation, there are several issues to consider when making the decision to provide an electric vehicle to an employee. These include: 

  • Second-hand vehicles – when determining if a vehicle qualifies under the purchase price limit, employers need to consider the purchase price for the first time the vehicle was sold in a retail sale [i.e. not the price you paid as the second hand purchaser]. 
  • Changing purchase prices – it is worth noting the same vehicle may be exempt or not depending on when and where the vehicle is purchased based on prices offered by retailers. 
  • Home charging stations are not included as an associated benefit of an exempt electric vehicle and may instead be an expense or property fringe benefit which is subject to FBT as normal. 
  • Car parking fringe benefits for electric vehicles are still subject to FBT. 

 

compliance obligations

FBT-exempt vehicles are still included in an employee’s Reportable Fringe Benefits Amount. 

The Reportable Fringe Benefits Amount is not included in an employee’s assessable income, nor does it affect an employer’s actual FBT liability. 

Instead, the Reportable Fringe Benefits Amount is included for determining if an employee is eligible for and liable for, various tax and non-tax-related concessions and obligations, including the following: 

  • Government co-contributions for personal superannuation. 
  • Certain tax offsets [e.g., Seniors and Pensioners Tax Offset]. 
  • The Medicare levy surcharge for employees who do not have sufficient private health coverage. 
  • Entitlement to the private health insurance rebate. 
  • HELP repayments. 
  • Child support. 
  • Certain Centrelink payments. 
  • Paid parental leave and other benefits. 

 

how to incorporate electric vehicles into your business 

If you’re interested in incorporating electric vehicles into your business, there are a few things you’ll need to consider. 

First, you’ll need to choose the right type of vehicle for your needs, taking into account different factors like the size of your business, the types [and lengths] of journeys employees need to make, and the charging infrastructure in your area. 

Next, you’ll need to think about the cost of purchasing or leasing an electric vehicle. While electric vehicles can be more expensive upfront than petrol or diesel vehicles, they may offer significant cost savings over time. You’ll also need to consider the ongoing costs of charging and maintaining your electric vehicle. 

 

final thoughts

Business owners will need to ensure employees are trained on how to use and maintain electric vehicles. This may involve providing training on how to charge the vehicle, how to operate the different features and how to perform basic maintenance tasks. 

 

First published 20 April 2023 

 

we’re here to help

If you need assistance understanding the changing obligations surrounding FBT and electric vehicles, or have any general tax enquiries, give the team at businessDEPOT Tax a buzz on 1300BDEPOT or email oneplace@businessdepot.com.au.

 

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general advice disclaimer

Business Depot Financial Planning BNE Pty Ltd ABN 27 644 561 400 and its advisors are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL No. 357306.

The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.