Electric Vehicle FBT Fringe Benefit Tax ATO

Electric cars now exempt from Fringe Benefit Tax (FBT)

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Whilst we were busy preparing for Christmas in December, legislation by the  Treasury Laws Amendment (Electric Car Discount Act 2022) was passed in both houses and received Royal Assent on the 12th of December 2022 to allow for an exemption from Fringe Benefits Tax (FBT) relating to electric cars – subject to certain requirements being met.

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages. This exemption will benefit both the employee and the employer by allowing the employee to salary package an electric vehicle. In instances where the employee salary sacrifices the entire monthly repayment and running costs of the vehicle, the employee will be able to pay for the car using their before tax salary.

You do not pay FBT if you provide private use of an electric car that meets all the following conditions:

  • the car is a zero or low emissions vehicle (including; battery electric vehicles, hydrogen fuel cell electric vehicles and plug-in hybrid electric vehicles (if the car has an internal combustion engine, it will only qualify if it can be recharged by an off-vehicle power source).
  • the first time the car is both held and used is on or after 1 July 2022. Second-hand cars can qualify, but only if their first retail sale was on 1 July 2022 or later. Cars ordered prior to 1 July 2022 will qualify if they were not delivered until 1 July 2022 or later.
  • 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. For the 2022-2023 income year, the LCT threshold is $84,916.
  • it is a motor vehicle designed to carry a load of less than one tonne and fewer than 9 passengers.

Benefits provided under a salary packaging arrangement are included in the exemption. The new law will retrospectively apply to vehicles held for use on or after 1 July 2022.

Private use of these cars will still result in reportable fringe benefits for employees, including for employees of not-for-profit employers. So employers will still need to perform FBT related calculations for these vehicles.

Electric car fringe benefits that are exempt from FBT will still be counted towards a current employee’s reportable fringe benefits amount (RFBA). This will apply for each FBT year in which the exempt benefit is provided, as RFBAs are used to determine various liabilities and entitlements. However, the employer is not required to report eligible electric car benefits provided to employees in their Fringe Benefits Tax returns.

If you have any questions or queries in regards to electric vehicles and FBT be sure to get in contact with us at STS Accounting.