The Australian Government has implemented a Fringe Benefits Tax (FBT) exemption to encourage the uptake of electric vehicles and reduce carbon emissions. The exemption applies to private use of a zero or low-emission electric car first held and used after 1 July 2022. For most employees who salary package a vehicle with their employer or a business that provides vehicles to its staff, there is an adjustment for tax purposes to include private usage. The exemption removes the adjustment for electric vehicles, resulting in a tax saving for the business or reduce the cost to the employee.
Eligibility for the exemption is based on several conditions:
- It must be a zero or low-emission vehicle, which includes battery electric vehicles, hydrogen fuel cell electric vehicles, or plug-in hybrid electric vehicles.
- The car must be designed to carry a load of less than one tonne and fewer than nine passengers, including the driver.
- Motorcycles and scooters are not considered cars for FBT purposes and are not eligible for the exemption.
- The cost of the vehicle must be below $84,916.
The following is an example comparing a salaried hospital employee packaging a non-electric vehicle to an electric vehicle. There are many factors in setting up a salary package agreement (novated lease); this example simply highlights the difference a new electric vehicle can make. In this example, a $60,000 car over 48 months on a salary of $150,000.
Example – 1 – Salaried hospital employee packaging an exempt electric vehicle VS a non-electric vehicle.
| Electric | Non-Electric | |
| Salary | $ 150,000 | $ 150,000 |
| Car Cost | $ 22,125 | $ 23,287 |
| Tax & Medicare | $ 34,938 | $ 39,469 |
| Cash Salary | $ 92,937 | $ 87,244 |
Hospital employees can obtain quotes from the salary packaging company/team (such as Maxxia), and your BBB Advisor can help explain the true benefit, options, and considerations.
For businesses providing electric vehicles to staff who are not part of a salary package agreement, which may include spouses, children and family, the tax benefit will vary, but it is there. A $60,000 vehicle using the default 20% tax adjustment value can result in a tax saving (at 47%) of $5,640 for a business.
While the exemption does introduce a tax saving, it is a reportable fringe benefit. This reportable amount will count towards the individual income for HELP repayments, Medicare Levy Surcharge, and other government benefits.
The exemption does not apply to plug-in hybrid electric vehicles from 1 April 2025 onwards, unless the private use of the vehicle was exempt before this date and the employer has a financially binding commitment to continue providing the vehicle for private use. This means that any optional extensions of the agreement are not considered binding. For instance, if an employer enters a novated lease with an employee to use a plug-in hybrid electric vehicle before 1 April 2025 and there is a binding commitment to provide the vehicle until 31 March 2027, then the private use of the vehicle is exempt from FBT up to 31 March 2027.
The Australian government will complete a review of the exemption by mid-2027 to consider the uptake of electric vehicles. This review will provide an update on the effectiveness of the exemption in promoting electric vehicles and reducing carbon emissions.
The FBT exemption on electric cars and associated car expenses is a positive move by the Australian government to encourage the uptake of electric vehicles and reduce carbon emissions. The exemption will make it more attractive for employers to provide electric cars for their employees and help reduce the environmental impact of transportation within Australia.
Should you have any queries regarding the above article, contact your BBB Advisor or our office at 03 9693 7777.
