The Fringe Benefits Tax year (FBT) ends on 31 March 2024.
In late 2022, as an incentive to promote electric vehicles (EV), the Australian Government allowed employers to provide EV to employees without incurring 47% FBT for private use.
The condition of the exemption applies to:
- Electric cars
- Hydrogen fuel cell electric cars
- Plug-in hybrid electric cars
The value of the car needs to be below luxury car tax (LCT) threshold at $89,332 for FY24 at the first transaction of a retail sale. In addition, the car should be both field held and used on or after 1 July 2022.
From 31 March 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles unless the vehicle:
- Meets the conditions for exemption before the date AND
- Has a binding agreement to continue private use after the date
Rising Issues
1. Exemption only applies to employees
The vehicle is required to be supplied by the employer to the employee (including under a salary sacrifice agreement; partners in a partnership).
Note: Sole traders do not classify as employees and cannot the exemption personally.
2. No exemption if employee directly purchases/leases an EV
If an employee directly purchases or leases an EV with the employer reimbursing them under a salary sacrifice arrangement, the exemption does NOT apply.
3. Employee travel deductions
Employees that are travelling in the course of performing their work is deductible and NOT subject to FBT, but employees travelling from home to their place of work is NOT deductible and subject to FBT.
4. If LCT applied to the car, it will never qualify for FBT exemption
If an EV failed the eligibility criteria (above the luxury car tax threshold at $84,916), when it was first purchased, even if the resell price is lower than the threshold does not make it eligible for the exemption.
5. Home charging stations are not included
Associated benefits such as registration, insurance, repairs and maintenance are included in the FBT exemption. However, home charging stations are NOT INCLUDED in the scheme.
Note: If an employer purchases a home charging station for the employee’s home, then this is a SEPARATE fringe benefit claim.
6. FBT paperwork
The value of the FBT is still taken into account (reported on the income statement) when calculating the reportable fringe benefits of the employee.
Note: This is used to determine your adjusted taxable income for areas such as Medicare levy surcharge, private health insurance rebate, employee share scheme reduction and certain social security payments
7. Cost of electricity
The ATO’s short-cut method to calculate reportable fringe benefit amount is calculating at a rate of 4.20 cents/km. Otherwise, you need a viable method of isolating and calculating the electricity consumption of the car.
8. Not all EV are cars
Only electric cars fall under this exemption. The following vehicles do NOT qualify for an exemption:
- Electric Bikes
- Electric Scooters
- Vehicles carrying a load of 1 tonne or more
- Vehicles carrying 9 or more passengers.
9. Businesses not registered for FBT
The ATO targets businesses that are not registered for FBT, so if you have provided fringe benefits to employees including but not limited to:
- Entertainment
- Salary sacrifice arrangements
- Forgiven debts
- Private expense reimbursements
- Accommodation
It is important to review your business’ FBT position and registration.
If you have any queries about your current FBT position, contact our Solomons Accounting team to learn more about how you can leverage this opportunity.
