December 6, 2022

FBT Exemption on Electric Cars

The Government has announced a proposal to exempt 100% of the Fringe Benefits Tax (FBT) payable on the provision of an electric car to employees in certain circumstances. If the bill goes ahead, it could provide a significant cash saving to suitable businesses.

Requirements

  •  Eligible cars will be “zero or low emissions vehicles” (EVs) which include:
    o battery electric vehicles
    o hydrogen fuel cell electric vehicles; and
    o plug-in hybrid electric vehicles
  • The value of the car at first retail sale will need to be below the luxury car tax threshold for fuel efficient vehicles (in 2022-23 this is $84,916)
  • The car must be first held and used on or after 1 July 2022 (cars that were used before 1 July 2022, by anyone, are not eligible)
  • A second-hand car may qualify, provided that the car was first purchased new after 1 July 2022

How much is the saving?

As a simple example, if a car is purchased for an employee for $55,000 including GST on 1 April 2023 and it is available for private use for the full FBT year to 31 March 2024, assuming the “statutory rate” method is used to calculate the FBT, the cash FBT payable on a regular petrol car in 2024 would be $55,000 * 20% * 2.0802 * 47% = $10,755.

In comparison, the FBT payable on an EV would be $Nil. All else remaining the same, the saving amount would be the same in 2025, 2026 & 2027, before reducing.

Other issues for consideration

  • Reportable fringe benefit amounts still need to be reported for the relevant employee.
  • These effect calculations on the individual tax return including the Medicare Levy Surcharge, certain tax offsets & eligibility for certain family assistance payments.
  • While the limit for this FBT exemption in 2022-23 is $84,916, keep in mind that the car limit on depreciation for this period is $64,741.
  • The explanatory memorandum states the concession is to be reviewed in 3 years.

There are many other considerations to take into account, and all circumstances are unique.

How can we help?

If you need assistance with understanding any of these changes, please give Brentnalls NSW a call so that we can discuss your particular requirements in more detail.

Kind regards

The Brentnalls NSW Team

 

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