Making Electric Vehicles (EVs) FBT-free is just the first step in the Government’s plan to make zero and low-emission vehicles the car of choice for Australians, focussing on affordability and overcoming “range anxiety” by:
- Cutting import tariffs
- Placing EV fast chargers once every 150 kilometres on the nation’s highways
- Creating a national Hydrogen Highways refuelling network, to deliver stations on Australia’s busiest freight routes
- Converting the Commonwealth fleet to 75% no-emissions vehicles
Though EV sales to business fleets comprised a mere 0.08% of the market in 2020, the government has committed to converting its own fleet to no-emission vehicles. As for the private sector, there is a wide gap between the cost of ownership of EVs and traditional combustion engine vehicles. It is more expensive overall, and as such, the government is looking to reduce that impediment through the FBT System.
How the Electric Vehicle Exemption will work.
The proposed FBT exemption is intended to apply to cars provided by an employer to an employee under the following conditions:
Low and zero emission cars
The car was first held and used on or after 1 July 2022
Where the car is first held and used on or after 1 July 2022. Provided the conditions of the exemption are met, an electric car that was ordered prior to 1 July 2022, but was not delivered until after 1 July 2022 would be eligible for the exemption (even if an employer acquired legal title to the car before 1 July 2022). However, a car delivered to you prior to 1 July 2022 would not qualify.
A second-hand electric car may qualify for the exemption, provided that the car was first purchased new on or after 1 July 2022.
Value below luxury car tax threshold for fuel efficient vehicles
The value of the car at the first retail sale must be below the luxury car tax threshold ($84,916 in 2022-23) for fuel-efficient vehicles. The luxury car tax threshold generally includes GST and customs duty but excludes other items such as service plans, extended warranties, stamp duty and registration.
If an electric car qualifies for the FBT exemption, then associated benefits relating to running the car for the period the car fringe benefit is provided, can also be exempt from FBT.
Government modelling states that if an EV valued at about $50,000 is provided by an employer through this arrangement, the FBT exemption would save the employer up to $9,000 a year.
Can I salary sacrifice an electric car?
Assuming your employer agrees, and the car meets the criteria, salary packaging is an option. While some FBT concessions are not available if the benefit is provided under a salary sacrifice arrangement, the exemption for electric cars will be available. For a salary sacrifice arrangement to be effective for tax purposes, it needs to be agreed upon, documented, and in place prior to the employee earning the income that they are sacrificing.
Government modelling suggests that for individuals using a salary sacrifice arrangement to pay for a $50,000 electric vehicle, the saving would be up to $4,700 a year.
Who cannot access the FBT exemption
Your business structure makes a difference
By its nature, the FBT exemption only applies when an employer provides a car to an employee. Partners of a partnership and sole traders will not be able to access the benefits of the exemption as they are not employees of the business. When it comes to beneficiaries of a trust and shareholders of a company it will be important to determine whether the benefit will be provided to them in their capacity as an employee or directors of the entity.
The exemption is limited to “cars”
As the FBT exemption only relates to cars, other vehicles like vans are excluded.
“Cars” are defined as motor vehicles (including four-wheel drives) designed to carry a load of less than one tonne and fewer than nine passengers.
EV State and Territory Tax Concessions
The Federal Government is not alone in using concessions to encourage electric vehicle ownership.
The ACT Government offers a stamp duty exemption on new zero-emission vehicles, and up to two years of free registration for new or second-hand zero-emission vehicles (registered between 24 May 2021 and before 30 June 2024).
New South Wales
Reimbursement of stamp duty paid on purchases of new or used full battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs), with a dutiable value up to and including $78,000.
For plug-in electric vehicles (battery and hybrid plug-in), from 1 July 2022 until 30 June 2027, access free registration for new and existing vehicles and a stamp duty concession of up to $1,500 on the first $50,000 of the car’s market/sale value – 3% thereafter.
Discounted registration duty for hybrid and electric vehicles and, a limited $3,000 rebate for new eligible zero-emission vehicles with a purchase price (dutiable value) of up to $58,000 (including GST) on or after 16 March 2022.
A limited $3,000 subsidy and a 3-year registration exemption on eligible new battery electric and hydrogen fuel cell vehicles first registered from 28 October 2021.
From 1 July 2022 until 30 June 2022, no stamp duty applies to light electric or hydrogen fuel-cell motor vehicles (including motorcycles). Vehicles with an internal combustion engine do not qualify.
A limited $3,000 subsidy is available for new eligible zero-emission vehicles purchased on or after 2 May 2021. More than 20,000 subsidies are available under the program. Plus, stamp duty for ‘green passenger cars’ is set at one rate regardless of value ($8.40 per $200 or part thereof).
Zero emission vehicles receive a $100 annual registration concession but are also subject to a per-kilometre road user charge.
A $3,500 rebate on the purchase of a new zero-emission, hydrogen fuel cell or battery light vehicle with a value of up to $70,000 purchased on or after 10 May 2022.
For more information on utilizing FBT-free Electric cars, please contact:
Warren Maris, BCom, FIPA, FFA
Magnus Business Advisers and Accountants
Mb: 0438 008 593