In a bid to lower fuel emissions and encourage the use of electric vehicles, the government decided in December 2022 to introduce an exemption of Fringe Benefits Tax (FBT) to electric cars (subject to specific requirements being met, of course).
Plug-In hybrids will only be able to be exempt until 1 April 2025. However, existing commitments for plug-in hybrids – which had access to the exemption prior to 1 April 2025 – will remain exempt. That means if you have signed for a contract for a plug-in Hybrid before 1 April 2025 it will be exempt and any car owned before that time.
It is important to note that there will be a review of the FBT exemption over the first three years of its operation is to be conducted and completed within 18 months of the end of the three-year period. So, this exemption might not be around forever.
This amendment also includes provisions that the review should assess the effectiveness of the FBT exemption in promoting the uptake of electric cars along with the type of motor vehicles that the provisions should cover.
Since July 2022, businesses have also been exempt from 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
- the first time the car is both held and used is on or after 1 July 2022
- the vehicle is used by a current employee or their associates (such as family members)
- the car is priced under the luxury car tax threshold of $84,916
The FBT exemption can also apply to second-hand electric cars, however, motorcycles and scooters do not qualify for the exemption.
Moreover, employers can now claim GST on most of the associated running costs, making it a great incentive to switch to a more eco-friendly transport option.
At present, a Zero or low-emissions vehicle must either be a battery electric vehicle, hydrogen fuel cell electric vehicle, or plug-in hybrid electric vehicle and be designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).
But before you get excited and buy a brand new low-emissions vehicle, it is important to keep in mind that as of July 2025, plug-in hybrid electric vehicles will not be considered zero or low-emissions under FBT law.
However, you may be able to apply for an exemption if both the following 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.
As a specialist small business accountant and tax advisor, we can ensure you don’t overpay or underpay your tax and can keep your assets protected. For more information on electric vehicle FBT exemptions, visit the ATO or give us a call today on 03 9847 7516.
Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.