FBT Exemption for Electric Vehicles
Electric vehicle FBT exemption legislation is now law.
Certain zero or low emission vehicles provided as a car benefit on or after 1 July 2022, can be exempt from FBT. The car needs to have been both held and used for the first time by the employer on or after 1 July 2022 and it cannot have been subject to the luxury car tax of $84,916.
A vehicle is a zero or low emissions vehicle if it satisfies two conditions:
1.
It is a:
- battery electric vehicle; or
- hydrogen fuel cell electric vehicle; 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).
Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.
Please note that in relation to plug-in hybrid electric vehicles, there is a specific limitation on the FBT exemption. From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law.
Where these conditions are met, the FBT exemption will extend to the associated car expenses for that vehicle, e.g., insurance, registration, repairs and maintenance, and fuel costs. Fuel costs will include the cost of electricity to charge and run the vehicle.
Note that a home charging station is not a car expense associated with providing a car fringe benefit for electric cars. However, depending upon how an employer sets up a charging station for their employee, it may be a property fringe benefit or an expense payment fringe benefit.
Although the private use of an eligible electric car is exempt from FBT, an employer still needs to include the notional value of the benefit when working out whether an employee has a reportable fringe benefits amount (‘RFBA’). This is not added to the employee’s taxable income but is used to determine Medicare levy surcharge and income tests for family assistance, child support and some other government benefits.
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