From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses
Eligibility
Fringe benefits tax (FBT) is not applied if you provide private use of an electric car that meets all these conditions:
- 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 (the current LCT threshold is $79,659).
Benefits provided under a salary packaging arrangement are included in the exemption.
Please note: Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.
Zero or low emissions vehicle
A vehicle is a zero or low-emissions vehicle if it satisfies both conditions:
- A battery electric vehicle, hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle
- A car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).
Plug-in hybrid electric vehicles – 1 April 2025 onwards
From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low-emissions vehicle under FBT law. However, you can continue to apply the exemption if both requirements 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’ electric car requirement
The practical effect of this requirement is that the electric car must be used for the first time on or after 1 July 2022 – even if it is held before this date.
An electric car 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.
Luxury Car Tax (LCT) treatment
To be eligible for the exemption, the value of the electric car must be below the LCT threshold for fuel-efficient vehicles (currently $79,659) at the time it is first sold in a retail sale, 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.
Associated car expenses
The following expenses are exempt from FBT if they are provided for an eligible electric car:
- registration
- insurance
- repairs or maintenance
- fuel (including electricity to charge and run electric cars).
The FBT may be reduced on any items that aren’t exempt car expenses, if the expenditure would have been deductible to the employee had they incurred it themselves. This is called the otherwise deductible rule.
Please note: A home charging station is not a car expense associated with providing a car fringe benefit for electric cars. However, it may be a property fringe benefit or an expense payment fringe benefit.
Reportable fringe benefits
Although the private use of an eligible electric car is exempt from FBT, you include the value of the benefit when working out if an employee has a reportable fringe benefits amount (RFBA). You will need to work out the notional taxable value of the benefits associated with the private use of the exempt electric car.
An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year. The RFBA must be reported through Single Touch Payroll or on the employee’s payment summary.