FBT Exemption for Electric Vehicles

Legislation has recently been passed with regards to making electric vehicles exempt cars (albeit with two Senate amendments). These new rules provide an FBT exemption for electric vehicles made available to employees for private use.

This “car fringe benefit” is an exempt benefit if it meets the following conditions:

1. the benefit is provided by employers to employees in respect of their employment or under Salary Packaging;
2. the cost of the car must be below the luxury tax threshold for fuel efficient cars (ie) $84,916 for 2022/23;
3. the car must also have been first held and used on or after 1 July 2022; and
4. the car is a zero or low emissions vehicle as detailed below:

a) Battery Electric Vehicle

A battery electric vehicle is a motor vehicle that:

• uses only an electric motor for propulsion; and
• is fitted with neither a fuel cell nor an internal combustion engine.

b) Hydrogen Fuel Cell Electric Vehicle

A hydrogen fuel cell electric vehicle is a motor vehicle that:

• uses an electric motor for propulsion;
• is equipped with a fuel cell for converting hydrogen to electricity; and
• is not fitted with an internal combustion engine.

c) Plug-in Hybrid Electric Vehicle (exemption applies from 1 July 2022 to 1 April 2025)

A plug-in hybrid electric vehicle is a motor vehicle that:

• uses an electric motor for propulsion;
• takes and stores energy from an external source of electricity; and
• is fitted with an internal combustion engine for either or both generation of electrical energy and propulsion of the vehicle

When will the exemption apply?

The exemption will apply retrospectively to the following car types:

• Battery Electric Vehicle and Hydrogen Fuel Cell Electric Vehicle first used on or after 1 July 2022; and
• Plug-in Hybrid Electric Vehicle first used on or after 1 July 2022 until 1 April 2025 (the first Senate amendment).

A review of the exemption is to be undertaken in 3 years time to determine the effectiveness and ‘take up’ of these measures (the second Senate amendment).

Does the exemption apply to second hand Electric Vehicle?

Second-hand cars will qualify for this exemption provided that they were first purchased as new on or after 1 July 2022 for less than the luxury tax threshold set in that financial year.

Is this exempt benefit a reportable fringe benefit?

This exempt car fringe benefit still counts for reportable fringe benefits amount, even though it has a zero FBT payable. This means that employers will still have to prepare an FBT calculation for electric vehicles they provide as fringe benefits, and employees will still have to report the taxable value (before the exemption) of the car fringe benefit as part of their Reportable Fringe Benefits Amount on their tax return.

If you have any queries in relation to the above, please contact our office on 08 9388 9744.