Designed to incentivise the uptake on zero and low-emissions vehicles in Australia and reduce transport emissions, the Electric Car Discount Bill removes import tariffs and Fringe Benefits Tax (FBT) effective from the 1st of July 2022.
The bill will affect dozens of electric vehicle models making them more affordable including Cupra, Ford, Hyundai, Kia, Mazda, Mercedes-Benz, MG, Mitsubishi, Nissan, Polestar, Renault, Tesla, and Volvo.
What is Fringe Benefits Tax?
Fringe Benefits Tax (FBT) is imposed on the taxable value of certain benefits employers provide to their employees or their employees’ family or other associates.
When referring to motor vehicles, the taxable value is the value of the personal use of the vehicle by the employee as permitted by the employer. Business or work use of the vehicle by the employee is not subject to FBT.
What criteria must be met to be eligible for the FBT exemption?
The FBT exemption applies to vehicles where the following criteria are met:
- 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 (including those procured under a novated lease) are included in the exemption.
What is considered a zero or low-emissions vehicle?
A vehicle is considered a zero or low emissions vehicle if it meets both of the following conditions:
- The vehicle is a:
- Battery electric vehicle
- Hydrogen fuel cell electric vehicle, or
- Plug-in hybrid electric vehicle
- It is a vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver)
Scooters and motorcycles are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.
Plug-in hybrid electric vehicles
From 1 April 2025, plug-in hybrid electric vehicles will not be considered a zero or low emissions vehicle under FBT law.
However, the exemption will continue to apply if the following conditions 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
‘Held and used’ the electric vehicle
The electric vehicle must be used by the driver for the first time on or after 1 July 2022 – even if it is held before this date.
An electric vehicle is 'held' when it is:
- owned (includes cars acquired under hire-purchase arrangements)
- leased (or let on hire), or
- otherwise made available by another entity.
An electric car is considered 'used' when it is used or available for use by any entity or person.
Example: Exemption does not apply – Car first used before 1 July 2022
Charlotte purchases an electric car on 1 April 2022. She makes it available for the private use of her employee, William, from that date until 30 July 2022.
On 1 August 2022, Charlotte sells the electric car to Company A. Company A makes the car available for the private use of its employees from 1 August 2022.
The first time the electric car was both held and used is before 1 July 2022. Therefore, any car fringe benefits are not exempt from FBT.
Example: Exemption applies – Car first used from 1 July 2022
John ordered an electric car on 1 February 2022. The car was not subject to LCT. The car was delivered on 15 June 2022, at which time legal ownership passed to John.
John first makes the car available for the private use of his employees on 5 July 2022.
On 1 September 2023, John sells the electric car to XYZ Co. The new owner makes the car available for the private use of its employees from 1 September 2023.
The electric car was:
- first held on 15 June 2022 – when John started owning it
- first used on 5 July 2022.
The first time the electric car was both held and used was after 1 July 2022.
Therefore, any car fringe benefits are exempt from FBT
What is the Luxury Car Tax threshold?
To be eligible for the FBT exemption, the electric car’s value as at the first retail sale must be below the fuel-efficient vehicles’ Luxury Car Tax (LCT) threshold, being $89,332 in the 2023/24 income year, 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.
Is an electric car procured through a novated lease eligible for the FBT exemption?
The FBT exemption applies to an electric vehicle procured through a novated lease, so long as it meets the exemption criteria.
Just like a petrol or diesel vehicle, you have the option to pursue a novated lease with an electric vehicle where the cost of the car and it’s running costs are deducted from your pre-tax salary.
Will an electric vehicle procured through a novated lease also be eligible for State-based EV Rebates and Incentives?
Electric vehicles procured under a novated lease may be eligible for state-based EV rebates and incentives. These rebates and incentives can significantly reduce the cost of owning and operating an EV in Australia, making them more accessible and attractive to a wider range of drivers. There are several terms and conditions attached to rebates, and we can assist in identifying what you are entitled to.
Make the switch
This is a great outcome for motorists, businesses, and climate action. This is a tax cut which will make electric vehicles cheaper, allowing more Australians to get behind the wheel of an electric car thanks to the Electric Car Discount Bill which will reduce up‑front and ongoing costs.
Whether you’re a business looking for a fleet vehicle, or a motorist looking for a personal vehicle, Fleetcare is here to help you make the switch to electric. Contact us today on 134 333.