In todayās business environment, sustainability and cost-efficiency go hand in hand. Electric vehicles (EVs) offer a promising solution, not only for reducing carbon emissions but also for minimising tax burdens. One such advantage lies in the exemption from Fringe Benefits Tax (FBT) on electric vehicles. Letās explore how businesses and employees can leverage this tax incentive strategically.
Understanding FBT and itās impact
Fringe Benefits Tax (FBT) is a crucial consideration for businesses providing additional perks beyond salaries to their employees. These perks, termed as fringe benefits, can encompass various offerings – for further information we have published a very informative article on our website ā ATO Crackdown on FBT – a warning for business owners.
The Electric Advantage: FBT Exemption for EVs:
As the Australian Federal Governments incentivises the adoption of electric vehicles, a significant perk for business owners is the FBT exemption on EVs. This exemption translates to substantial tax savings making EVs an attractive option for corporate fleets.
Criteria for Eligibility:
While the FBT exemption on electric vehicles is enticing, itās essential to meet specific criteria. An eligible car needs to be classified as a zero or low emissions vehicle, which is limited to the following:
- battery electric vehicles
- hydrogen fuel cell electric vehicles, and
- plug-in hybrid electric vehicles
If the zero or low emission vehicles qualifies for the FBT exemption, then the following associated benefits relating to the car for the period the car fringe benefit is provided can also be exempt from FBT:
- registration
- insurance
- repairs or maintenance, and
- fuel, including electricity to charge and run the vehicle.
The FBT electric car exemption does not extend to the cost of a home charging station. This should normally be considered a separate FBT benefit.
Changes expected in 2025FY:
Plug-in hybrid electric vehicles will no longer be considered a zero or low emissions vehicle under FBT law from 1/4/2025, but the vehicle will still be exempt from FBT if:
- Use of the plug-on hybrid electric vehicle was exempt before 1/4/2025,
- you have a financially binding commitment providing private use on and after 1/4/2025.
With the rules changing from 1/4/2025, you will then have 10-11 months to purchase a plug-in hybrid if you choose this EV.
Strategic Implications:
In order to qualify for the FBT exemption, the car needs to be first held and used on or after 1 July 2022, and the value of the car at the first retail sale (and any subsequent sale) must be below the luxury car tax threshold for fuel efficient vehicles ($89,332 in 2024 FY but this is indexed each year).
Integrating electric vehicles into your business isnāt merely about sustainability; itās a strategic financial move. Beyond tax savings, providing EVs as fringe benefits can enhance employee satisfaction and attract top talent. Businesses can position themselves as leaders in sustainability while optimising their tax liabilities.
How can Walsh Accountants help?
Leveraging tax incentives like the FBT exemption on electric vehicles can yield significant advantages. By embracing EVs, businesses can drive environmental change, enhance their financial outlook, and position themselves as forward-thinking leaders. With careful consideration and strategic planning, electric vehicles can become a cornerstone of sustainable and tax-efficient business practices.
If you would like to explore how the FBT exemption on EV’s can benefit your business and help you gain significant financial advantage, please contact our office to speak with one of the many business specialists in our team.
