It’s official: EVs are now exempt from Fringe Benefit Tax (FBT) in Australia for a limited time!
The Treasury Laws Amendment (Electric Car Discount) Bill 2022 officially passed in December 2022. This bill will allow company cars that are fully electric or plug-in hybrids to be free from FBT. FBT is a tax that is placed on non-salary benefits and perks that are given to employees. This tax is borne by the employer.
What Does This Mean For My Company?
If you’re looking to change your company vehicles or wish to further expand your corporate social responsibility, this is the perfect opportunity to save your organisation money and positively benefit the environment.
Crunching the Numbers:
The Minister for Climate Change and Energy, Chris Brown, has stated that through this bill, companies that purchase a car for around $50,000 are expected to save up to $9,000 a year.
Some important details to note:
– This exemption will apply retrospectively to vehicles that were used for the first time on July 1, 2022 (even if they were held before that date).
– This exemption is only for vehicles that are under $84,916 (for the 2022-2023 financial year).
– The exemption includes the following car expenses: registration, insurance, repairs and maintenance, and fuel (including electricity to charge the vehicle).
– The exemption will be reviewed (and possibly changed) in mid-2027 to gauge its effectiveness and evaluate electric vehicle uptake.
– Plug-in hybrid vehicles will be exempt until April 1, 2025, as by that time they will not be considered a zero or low-emissions vehicle.
– As motorcycles and scooters are not considered fringe benefits, their electric counterparts will not be part of this exemption.
What Are Fringe Benefits?
Fringe benefits are non-salary perks or benefits that are given to employees. Paid by employers, fringe benefits (or perhaps better known by employees as “work perks”), have been used for decades as a way to attract, retain, and motivate staff.
While crucial to enticing staff, fringe benefits don’t come cheap. The rate of FBT in Australia is currently at 47%. So be sure to reach out to your tax expert to find out how your company can take advantage of this unique opportunity.