Fringe Benefit Tax (FBT) Series 3 - Electric Vehicles (EV)

With the rise of electric vehicles (EVs) in Australia, many employers are asking the same question: “Can I provide an electric car to my staff and avoid FBT?” The answer — in many cases — is yes, thanks to recent legislative changes.

In this article, we will unpack the FBT treatment of EVs by looking at how the exemption applies and discuss the traps to watch out for.

The EV FBT Exemption: What Changed?

From 1 July 2022, eligible zero or low-emission vehicles provided to employees may be exempt from Fringe Benefits Tax. This makes EVs a highly tax-effective option for employers offering company cars.

Which Electric Vehicles Are Exempt?

To qualify for the FBT exemption, the vehicle must meet all the following:

• Zero or Low Emission Vehicle: These are battery electric vehicles (BEV) or hydrogen fuel cell electric vehicles.

• First Held and Used on or After 1 July 2022: Only vehicles first held and used by the employer from 1 July 2022 are eligible. Pre-existing electric vehicles will not qualify.

• Value Threshold: The car’s first retail sale price (including GST and luxury car tax) must be below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles — $91,387 for the 2024–25 financial year.

Please note that from 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law.

What Does the FBT Exemption Cover?

The exemption applies to the car benefit and associated running costs, including:

• Registration

• Insurance

• Repairs and maintenance

• Electricity used for charging (if paid by the employer)

However, employee contributions are not required to reduce FBT since the taxable value is already nil.

Please note that the exemption applies for FBT purposes only but the benefit is still reportable fringe benefit for employees. As a result, you will need to work out the notional taxable value of the fringe benefits associated with the private use of the exempt electric car. If the value of those fringe benefits exceed $2,000, employers still need to report the benefit on the employee’s payment summary as a Reportable Fringe Benefit Amount (RFBA).

GST Implications

If you're registered for GST and the car is used in carrying on your business, you can generally claim GST credits on the purchase. However, the GST credit is limited to the car depreciation cost limit, which is $69,674 for the 2024–25 financial year. The maximum amount of GST credits you can claim for a car purchase is $6,334.

This cap applies regardless of the actual purchase price (even if you bought a $90,000 EV).

Income Tax Implications

For income tax purposes, you can claim the following costs as a tax-deductible expense.

• The depreciation of the car: However, please note that the car depreciation cost limit ($69,674 for the 2024–25 financial year) still applies.

• Interest on finance (if applicable)

• Running costs (servicing, charging, insurance, etc.)

Salary Packaging an EV is Huge Opportunity

Because eligible EVs are FBT-exempt, they are also extremely attractive for salary packaging. This can allow employees to:

• Receive a fully maintained EV

• Pay for it from their pre-tax salary

• Save on income tax without triggering FBT

Employers may also benefit by offering competitive remuneration packages without incurring extra tax costs.

What Employers Should Do Now

If you're considering EVs for your team or already providing one, here’s what to check:

• Confirm the car meets the ATO’s definition of an eligible zero or low-emission vehicle

• Check purchase/use dates and LCT threshold

• Keep records of operating costs and usage

• Review any novated lease arrangements

• Understand the reporting requirements for payment summaries

Common Mistakes to Avoid

• Assuming all electric cars are exempt — check the LCT threshold and date of first use

• Forgetting to report RFBAs on employee summaries

• Providing PHEVs beyond 1 April 2025 without meeting the transitional rule

• Claiming an exemption for non-electric hybrids or cars acquired pre-July 2022

Final Thoughts

The EV FBT exemption is a powerful incentive but only if the rules are followed carefully. If you do it right, it can mean significant tax savings for both employers and employees, and it supports your business’s sustainability goals.

Up Next in Our FBT Series…

In Part 4, we’ll explore entertainment fringe benefits — including meals, functions, staff gifts and more — and when they do (or don’t) attract FBT.

Need help structuring a tax-effective EV or novated lease arrangement? Want to check if your company qualifies for the exemption?

Let’s talk (https://www.goodpca.com.au/contact-us).

Disclaimer

This content is intended as a general guide for GOOD PEOPLE ACCOUNTING SERVICES clients. The information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, GOOD PEOPLE ACCOUNTING SERVICES disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information.