New FBT Exemption for Electrical Vehicles (EV)

October 26, 2023

From 1 July 2022 employers do not pay fringe benefit tax on eligible electric cars and its associated expenses. This has come into effect after enacting the Treasury Laws Amendment (Electric Car Discount) Bill 2022.

The Commonwealth of Australia is encouraging to buy electric cars by offering exemption in tax, increasing its affordability, and working towards reducing Australia’ carbon emissions.

What is the eligibility to get tax exemption?

Employers will not pay FBT if they provide electric car to employees for private use if that meets below conditions:

The car (benefit) is provided in respect of the employment to a current employee or their associates i-e family members.
The car is a zero or low emissions vehicle.
The car is both held and used on or after 1 July 2022.
Luxury car tax (LCT) has never been payable on the importation or sale of the car – for 2022-23 income year the value of car must be below LCT value which is $84,916.

In 2027, the Government will complete a review into this exemption.

What is zero or low emissions vehicle?

EV is a zero or low emissions vehicle if it is:

A battery vehicle
Plug-in hybrid
Hydrogen fuel cell EV

And it is designed to carry a load of less than 1 tonne.

Held and used the electric car on or after 1 July 2022

This exemption applies only when the car was held or used at or after 1 July 2022.

The car is deemed held when it is:

Owned
Leased
Or made available by another entity

Re the term “used the electric car”, it means the car is used or made available for use by a company.

Example: exemption does not apply – car first used before 1 July 2022

Arun purchased an electric car on 23 March 2022. He made it available for the private use of his employee, Malik, from that date until 15 August 2022.

The first time the electric car was both held and used is before 1 July 2022. Therefore, any car fringe benefits are not exempt from FBT.