Certain electric vehicles are exempt from fringe benefits tax, but not all of them. Chartered accountant GAIL FREEMAN explains which is which.

Jewel and Harry were keen to buy an electric car for their business, inspired by the news that the purchase may be free of fringe benefits tax.

I told them that, yes, certain vehicles were exempt from FBT.

“To be eligible for the exemption, the vehicle must be a battery electric vehicle, a plug-in hybrid electric or a hydrogen fuel cell electric vehicle,” I said.

“In addition, the vehicle must be a car as defined in the legislation. That is, a passenger vehicle designed to carry a load of less than one tonne and fewer than nine passengers. The car must have been first held and used after July 1 2022 and it must be valued below the luxury car tax threshold, which for the financial year 2024/25 is $91,387 GST inclusive.”

However, some vehicles were not eligible for the FBT exemption even if they were electric. These included motorcycles and scooters, large work vans, commercial vehicles that can carry a load of more than one tonne, caravans and motorhomes.

“In addition, cars that have an electric motor that do not require charging are not counted as low-emission vehicles for the FBT exemption,” I told the couple.

“You can still buy one of these if you wish, but it will simply have to be under salary sacrifice arrangements.

“By the way, for plug-in hybrid vehicles the exemption is only available until March 31 2025. However, for battery electric vehicles and hydrogen fuel cell electric vehicles there is currently no end date for the FBT exemption.”

Jewel said they had been looking at a few cars and we’re just trying to make a final decision. Was there anything else they needed to know?”

“Yes,” I replied. “The car must be used by current employees or their associates, usually family members. The car has to be defined as zero or low emissions and luxury car taxes have never been payable on the vehicle.

“Depending on the finance arrangement, some of the car expenses are also exempt from FBT if they are provided for an eligible electric car. These include registration, insurance, repairs and fuel including the cost of electricity to charge the car.

“Just as an aside a home-charging station is not a car expense associated with providing a fringe benefit, but it may be a property fringe benefit so if you decide to install a charging station either at home or at the office you may need some more FBT guidance.

“Of course, it can be difficult to work out the car’s electricity usage, particularly if the car is charged at home. Given that the electricity is unable to be separately identified and costed, the tax office has set an electric vehicle home charging rate of 4.2 cents a kilometre travelled. You can use this rate for your costs of vehicle charging.

“You will, of course, need to keep good records of the kilometres so that you can work out how many kilometres you have travelled. You can then use the per kilometre rate of 4.2 cents to calculate this figure.

“However, if your car is a plug-in hybrid electric vehicle, you cannot use this method. You will have to calculate your electricity usage separately.

“I, too, am looking at buying an electric vehicle, so it will be interesting to see where our research leads us both.”

If you need any information on FBT, electric cars or any other tax related matter contact the expert team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.