Melbourne AccountantMelbourne AccountantMelbourne Accountant
1300 NXT GEN (698 436)
9am to 9pm
VIC 3008

Now That Electric Cars Are Exempt From FBT, What Does This Mean For You?

  • Home
  • Consulting
  • Now That Electric Cars Are Exempt From FBT, What Does This Mean For You?
businessman analyse investment marketing data x
businessman analyse investment marketing data

Now that electric cars are exempt from FBT, what does this mean for you?

Judy White, Director, and Stefanie Merlino, Partner, contributed to this article.The BDO Group in Australia.Both Houses of Congress have now passed the Treasury Laws Amendment (Electric Car Discount) Bill 2022 (the Bill).It was passed by Parliament with two amendments from the Senate and received Royal Assent on 12 December 2022.Electric cars are exempt from Fringe Benefits Tax (FBT),As long as certain requirements are met.We outline some of the practical implications of this FBT in this article.Electric cars are exempt from the tax.

Amendments made recently

In the first amendment, the Senate adds a sunset clause for the exemption of plug-in hybridsHowever, existing commitments for plug-in hybrids, which had access to the exemption prior to April 2025, continue to apply.Exempt until April 2025.According to the second amendment, the FBT exemption will be reviewed after three yearsThe operation must be conducted within 18 months of the end of the three-year period.The operation must be conducted within 18 months of the end of the three-year period.

Also included in this amendment are provisions that should be reviewed:

  • How effective the FBT exemption is in promoting electric car adoption
  • Whether some or all of those provisions should continue to operate
  • The type of motor vehicles covered by the provisions.
  • There will be public consultation on the topics of the review as part of the process.
  • Provisions are not subject to FBT, resulting in employer savings
  • Automobiles powered by electricity
  • It is noted that many employers provide vehicles to their employees as part of their employment.
  • An employer may be liable for FBT if the employee uses it for private purposes
  • FBT is not applicable.

Calculation of annual savings (using current FBT and grossup rates):

Screenshot   x

Arrangement for sacrifice

Employees who enter into a novated lease agreement or agree to contribute financially

Salary after tax.

In this way, the post-tax amounts can be offset against the taxable value of the car fringe benefit. In the case of electric cars qualifying for this exemption, the employee’s total contribution may now be as follows:

  • Employees will benefit from significant tax savings as a result of this change.
  • Taxes are reduced as a result.
  • Below is an example of the estimated income tax savings for an employee making $150,000 a year
  • During the year, the employee makes pre-tax contributions towards the provision of an electric car
  • Arrangement for sacrifice.

Calculations per year – example:


Using the above example, salary sacrificing electric car costs results in annual savings ofThe employee will receive $9,250.Adverse effects of reportable fringe benefitsThe FBT exemption requires an exempt electric car to be included in the calculationIt is likely that this will result in an administration cost for the employee’s Reportable Fringe Benefit Amount (RFBA).In order to calculate the taxable income, employers must maintain accurate records.To determine the RFBA for their employees, they use the value of the car.While an employee does not pay income tax on an RFBA, it will affect their tax liability.This information will be included in the employee’s tax return and used to calculate various benefitsLiabilities and entitlements (e.g. contributions to higher education, family assistance eligibility)Invoices, payments, etc.Salary packaging may result in income tax savings for employees, however.These savings may be offset to some extent by eligible electric cars, as shown in our example aboveThis is the employee’s RFBA.Benefits that are exempt from FBT usually do not require reporting (subject to certain exceptions)There are exceptions, such as reporting obligations for FBT-exempt employers, so the potential impact.

Where an individual receives an FBT exempt electric package as part of their salary package, the RFBA may affect their personal tax situation

  • Consider buying a car.
  • As a result, employees should ensure they seek the requisite advice to understand the extent of their obligations
  • A RFBA may have a financial impact on them and, further, whether this offsets income tax gains
  • Electric cars may provide these benefits.
  • The impact of charging an electric car at night

Home of employee

The operation of electric cars requires electricity, however the impact of household electricity costs must be considered.For FBT purposes, employees charging their electric cars require further consideration.FBT legislation exempts car expenses attributable to the provision of a vehicleThe FBT is not applied twice to the same category of fringe benefits.

The advantages.

According to the ATO’s recent guidance, fuel is considered a car expense for FBT purposes.

A car expense includes fuel, which includes electricity for charging and running electric cars.

Reimbursement may be available to employees who charge their cars at home using their own electricity

The alternative is to salary sacrifice these costs. However, without a separate meter, salary sacrifice is not possible.

How will an employee calculate and record electricity costs associated with electricity consumption

Are they charging their electric cars?

Employers and employees alike continue to face this challenge, and we await further guidance

The ATO will assist users of electric cars with calculating electricity costs when charging their vehicles

The ATO has indicated a Draft Practical Compliance Guideline should be prepared in this regard

Around March 2023, the document was issued.

It is also possible for employees to use charging stations instead of charging at home.

Charging stations are available from a number of different providers, and the cost varies according to the provider

This option eliminates the challenges associated with dissecting and researching providers.

As we await further guidance from the ATO, we cannot compare home charging with electric car charging costs.

Using public charging stations without fully charging the battery may reduce the life of the electric car’s battery

Over time, capacity increases.

In light of our previous comments regarding the need to calculate an employee’s taxable value

An electric car’s RFBA can be determined using the Operating Cost Method (OCM)

As part of this valuation, electricity costs must be taken into account.

Car expenses.

While the OCM may produce a more tax-effective result than the Statutory Formula Method,

As a result, employers should consider how electricity costs are calculated when calculating RFBA for employees

This will be determined, including the additional administrative burden.

The impact of providing wall chargers at events

Home of employee

Additionally, it is unclear whether costs associated with the purchase and installation of

A wall charging unit in an employee’s home will qualify as exempt, and be exempt from FBT.

It is anticipated that the ATO will provide further guidance in this regard, which will enable employers to make informed decisions in this regard

FBT-exempt car packages may include this component.

Originally published on the BDO Australia website, this article has been reprinted with permission.



Previous Post
Newer Post

Leave A Comment

Translate »
HTML Snippets Powered By :