FBT exemption for electric vehicles

On 27 July 2022, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 (the Bill) was introduced by the Government to remove Fringe Benefits ax (FBT) on eligible electric vehicles provided by an employer to its current employees for private use. The proposed measure will be subject to review after a period of three years.

The Government also announced it will remove the 5% customs duty on eligible electric vehicles (excluding vehicles manufactured in Russia or Belarus). There are also various State/Territory tax/duty concessions that already apply to certain electric vehicles.

Date of effect

The proposed exemption will apply retrospectively from 1 July 2022 to eligible electric vehicles that are first held and used on or after 1 July 2022. Electric vehicles ordered prior to 1 July 2022 but not delivered until after 1 July 2022 will still be eligible for the exemption. If an eligible electric vehicle is sold in future years, the secondary owner may also qualify for the exemption if the vehicle was first purchased new on or after 1 July 2022.

Eligible electric vehicle

To be an eligible electric vehicle, it must be a ‘zero or low emissions vehicle’ which is defined as either:

• A battery electric vehicle
• A hydrogen fuel cell electric vehicle
• A plug-in hybrid electric vehicle.

Importantly, the exemption will not apply to electric motorbikes or similar vehicles that are not considered as a ‘car’ for FBT purposes. Under the FBT provisions, a ‘car’ is a vehicle designed to carry less than 1 tonne and fewer than nine people.

Luxury car tax threshold

To be eligible for the exemption, the retail price of the vehicle must be below the luxury car tax threshold for fuel efficient vehicles, which is $84,916 for the financial year ended 30 June 2023 (indexed annually).

Reporting exempt car fringe benefits

Car fringe benefits that are exempt from FBT will still need to be included for the purpose of determining an employee’s reportable fringe benefits amount (RFBA). The RFBA is used to determine various liabilities and entitlements such as an employee’s Medicare levy surcharge.

If you have any questions in relation to the above update or would like to find out more about the new FBT exemption, please contact our PKF tax team.