The Treasury Laws Amendment (Electric Car Discount) Bill 2022 Bill has been passed by the Senate. It amends the FBTAA 1986 to exempt from fringe benefits tax cars that are zero or low emissions vehicles held by the provider and used by or made available for private use of employees.
Additionally, to be eligible for the exemption 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 cars.
Eligible Electric Cars
An electric car must meet specific criteria to be eligible for the FBT exemption. Specifically, a car that is a ‘zero or low emissions vehicle’ is defined as being either:
- A battery electric vehicle, which is a car that:
- Uses only an electric motor for propulsion
- Is not fitted with a fuel cell or an internal combustion engine.
- A hydrogen fuel cell electric vehicle, which is a car that:
- Also uses an electric motor for propulsion
- Is equipped with a fuel cell for converting hydrogen to electricity
- Is not fitted with an internal combustion engine.
- A plug-in hybrid electric vehicle, which is a car that:
- Uses an electric motor for propulsion
- Takes and stores energy from an external source of electricity
- Is fitted with an internal combustion engine for the generation of electrical energy and/or propulsion of the car. This means that a car with an internal combustion engine will only qualify for the exemption if it can be recharged by an off-vehicle power source.
Cars that do not meet the specific criteria of a ‘zero or low emissions vehicle’ will not qualify for the FBT exemption, and employers providing car fringe benefits on these cars will be subject the FBT on the taxable value of the benefit.
Date of Effect
FBT exemption will only apply to fringe benefits provided on or after 1 July 2022, for eligible electric cars that are first used on or after 1 July 2022. This means that the electric cars that employers have provided to employees for their use before 1 July 2022 will not be eligible for the FBT exemption.
What this means for you?
For employers who provide vehicles to employees in respect of their employment, where the vehicle is made available for the employee’s private use, we estimate that they could be saving just under $10,000 p.a. (using statutory method) for an electric car costs around $50,000.
Where employees who enter into a novated lease arrangement, or otherwise agrees to financially contribute towards the provision of a car fringe benefit, some or all of the employee contribution will typically be made from after-tax salary. An employee who earns $100,000 before-tax salary and put towards $15,000 pre-tax contributions towards purchasing an electric car under a salary sacrifice arrangement is estimated to save around $5,000 p.a. (based on 2022-23 tax rates).