Eligible Electric Cars

FBT EXEMPTION FOR ELIGIBLE ELECTRIC CARS

Eligible Electric Cars – Now exempt from Fringe Benefits Tax!

The new Fringe Benefits Tax (FBT) exemption for electric cars has the effect of making all expenses, depreciation, and GST (up to the $64,741 cost limit) for eligible electric cars 100% deductible, no matter what the business use of the vehicle is. This may make the business case for purchasing an electric vehicle attractive to small business and fleet buyers. Outlined below are a few key facts to know about the exemption. Please get in touch with us if you would like to discuss if this is a good option for your business.

From 1 July 2022, employers no longer have to pay FBT on eligible electric cars and associated expenses (registration, insurance, repairs and maintenance and fuel, including electricity to charge and run the cars).

So, what conditions make an eligible electric car?

  1. It must be a zero or low emissions vehicle:
    1. Can be a battery electric car, hydrogen fuel cell electric car or plug-in hybrid electric car (the latter only until 1 April 2025).
    2. Designated to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).
  1. It must be held and used on or after 1 July 2022.
  2. It must be used by a current employee or their associates (i.e. family member).
  3. It must have never had Luxury Car Tax (LCT) payable on its sale – this applies when the GST inclusive value of the car is over $84,916 (threshold for 2022-2023).

The FBT electric car exemption does not extend to the cost of a home charging station, which should be considered a separate fringe benefit.

Exclusions to be considered:

  1. Motorcycles and scooters are not considered cars for FBT purposes and are therefore excluded from this exemption.
  2. Your business structure matters. The exemption applies when an employer provides the fringe benefit to an employee, which does not apply to partners of a partnership and sole traders. Beneficiaries of trusts will also have to demonstrate that the benefit is provided to them as directors/ employees, rather than beneficiaries.

The Australian Taxation Office has provided some examples at Electric Cars Exemption, to help you understand where the FBT Electric Car Exemption applies.

 Feel free to Contact Us or call 0416 919 036 if you would like any further advice in this area.