The Electric Car Discount Bill was introduced to accelerate the adoption of zero or low emissions vehicles in Australia, by removing import tariffs and Fringe Benefits Tax (FBT) on eligible vehicles.
Drivers who are interested in purchasing a Plug-In Hybrid Electric Vehicle (PHEV), have until 1 April 2025 to take advantage of the FBT exemption. After this date, a PHEV will no longer be considered a zero or low emissions vehicle under FBT law.
What is Fringe Benefits Tax?
Fringe Benefits Tax (FBT) applies to the value of specific benefits given by employers to employees or their families and associates.
For motor vehicles, the taxable value is determined by the purchase price and the personal use of the vehicle by the employee, as allowed by the employer. FBT doesn't apply to business or work-related use of the vehicle by the employee.
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 arrangement) 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 no longer 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 plug-in hybrid electric vehicle
The plug-in hybrid 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.
A plug-in hybrid 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.
A plug-in hybrid electric vehicle is considered 'used' when it is used or available for use by any entity or person.
What is the threshold for Luxury Car Tax?
To be eligible for the FBT exemption, the plug-in hybrid electric vehicle’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 a plug-in hybrid electric vehicle second hand, you need to determine if it was subject to LCT at any time in the past.
Does a plug-in hybrid electric vehicle obtained through a novated lease qualify for the FBT exemption?
The FBT exemption applies to a plug-in hybrid 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 a plug-in hybrid electric vehicle where the cost of the car and it’s running costs are deducted from salary. Under the FBT exemption, the novated lease will be 100% pre-tax, maximising your income tax savings.
Would a plug-in hybrid electric vehicle acquired via a novated lease qualify for State-based EV rebates and incentives as well?
Plug-in hybrid electric vehicles acquired through a novated lease arrangement 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.
Plug into savings!
More and more Australian drivers can now get behind the wheel of a zero or low emissions vehicle, thanks to the Electric Car Discount Bill which is making electric cars more affordable.
Whether you’re looking for a business vehicle or a personal vehicle, Fleetcare is perfectly placed to help you plug into savings! Contact us today on 134 333.