FBT Exemption on electric vehicles

From 1 July 2022, regardless of whether the benefit is supplied through a salary sacrifice arrangement, an FBT exemption may apply to the employer if they provide you with the use of a car that is classed as a zero or low emissions vehicle. In most cases, these qualify for the FBT exemption:

• The car’s original purchase price was less than the luxury car tax level for fuel-efficient vehicles (currently $84,916 for 2022-23). If the original purchase price of the electrical vehicles was more than the luxury vehicle tax threshold, the FBT exemption will not apply to your purchase; and 
• Possession and initial usage of the vehicle must occur on or after July 1, 2022. If the vehicle is not made available to employees until 1 July 2022 or later, then it may still be free from FBT even though it was purchased before 1 July 2022.

Also included in the exemption are:  

• Registration
• Insurance
• Maintenance
• Electricity for charging and operating the car.

However, a charging station is not included.

Although companies are exempt from FBT on EVs, the value of the benefit is still factored in when determining the employee’s taxable fringe benefits. The employee’s income is adjusted to reflect the value of the benefit. Reportable fringe benefits are not subject to income tax, but they are factored into your AGI for purposes like the Medicare levy surcharge refund, private health insurance rebate, employee share scheme reduction, and certain social security payments.

Those who do not qualify for the FBT exemption

The FBT exemption can only be used if a company gives an employee an automobile. Individuals who are not employees, such as partners in a partnership or sole proprietors, are not eligible for the exemption.

The exemption can only apply if the benefit is delivered to the beneficiary in his or her position as an employee or as a director of the entity (the beneficiary must be able to demonstrate that he or she plays an active part in the management of the entity). 

What are the tax implications of installing a home charging unit?

The FBT exemption for EVs does not cover charging stations, as confirmed by the ATO. Therefore, if an employer gives an employee a charging unit, FBT may be due. 

Depreciation deductions for the cost of a home charging unit may be available to an employee over a number of income years if the equipment is used to charge a car utilised for business purposes. 

However, the cost of the charging device is not deductible if the employee uses the vehicle solely for personal reasons.

How much does the power bill usually run?

For example, an employee used to build up big travel costs for work, but after switching to an electric vehicle, his or her expenses plummeted. His new electric car running rate is 3 cents every kilometre driven.

The ATO has mandated a rate of 4.20 cents per km for running costs of EVs delivered to an employee (from 1 April 2022 for FBT and 1 July 2022 for income tax) due to the fact that it is sometimes impossible to separate home electricity usage. 

Using this rate precludes reimbursement for expenses incurred at commercial charging stations. You can’t have both of them at the same time.