24 February 2023

Electric Vehicles: Green, Mean and FBT Free

Australia has had a long, exciting, and at times tumultuous relationship with motor vehicles. Many brands have come to try and conquer this sunburnt country with a new, exciting vehicle and many have failed. Including the mighty Holden roaring its mighty, final roar back in 2017 building its final V8 Commodore in Australia before finally closing at the end of 2020. If you had said to someone back in the 70s when the Kingswood was launched and nearly half a million sold in a three-year period that in 40 years it would all be over, they probably would have laughed at you.

But that is what has happened in Australia. We have gone from a country wanting to buy family sedans to a country that wants weekend warrior utes like the Ford Ranger, city friendly SUV’s like the Mazda CX-5 to the Greta Thunberg thumbs up electric cars. In fact, last month the Tesla Model 3 was the third highest selling vehicle in Australia behind the Ranger and Hilux.

Back in August 2022 we brought to our readers’ attention that to get businesses to jump onto the green machine of electric vehicles that a bill was being introduced to Parliament to get electric cars to be exempt from fringe benefits tax, read the article here.

It was for electric vehicles first held on or after 1 July 2022 and the vehicle must be below the fuel-efficient luxury car tax (for the 2022-23 financial year is $84,916).

The legislation was for zero or low-emission vehicles including:

  • Battery electric vehicles
  • Hydrogen fuel cell electric vehicles
  • Plug-in hybrid electric vehicles

Although excluding:

  1. Self-charging hybrid electric vehicles
  2. Electric motorbikes
  3. Vehicles designed to carry a load of more than 1 tonne or more than 9 people (utilities or vans)

The bill was passed through both houses of Parliament so what does that mean for you as business owners and employees?

Well, the good news is that not much was changed between when the bill first entered the parliament through to when it was passed by both houses. One takeaway was that from the 1 April 2025 a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law but if you are using one of these vehicles at this time you can still continue to apply the exemption if the following is met:

  1. Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and
  2. You have a financially binding commitment to continue providing private us of the vehicle on or after 1 April 2025.

Another factor to take into consideration with the zero or low emissions vehicles is the price and where it comes into the luxury car tax for fuel efficient vehicles. The popular models like the Tesla Model 3 currently start from $64,300, however, some vehicles are being sold on the market for much higher than this. As we stated before in our August issue the threshold for the 2022-23 financial year is $84,916 meaning that models like the Tesla Model 3 are under this. However, to be exempt from the luxury car tax it must be below the threshold at the time it was first sold in Australia and any subsequent sales otherwise it will not be exempt from FBT.

With the purchase of the zero to low-emission vehicle there may come some adjustments to people’s home through the installation of home charging stations. These, however, are not a car expenses associated with providing a FBT.

Last week though a case came before the High Court which could have massive implications for electric vehicle up take in Australia. Currently in Victoria they have a road usage tax for electric vehicles meaning that owners of electric vehicles are charged 2.5 cents per kilometre on certain roads for electric vehicles and 2 cents for plug-in hybrid electric vehicles. Owners had to provide an odometer reading 14 days after it began on 1 July 2021. It has been described as “the worlds worst EV policy” and “a cash grab” due to the state being worried about missing out on the trickle down of the fuel excise from the Federal Government. Obviously, this case has only just begun so it is a watch this space event but it will be interesting to see where the chips fall in regards to the tax and if other states will take it up it Victoria is successful in their arguments.

It is exciting what is happening in the motoring landscape for businesses in Australia. Initiatives such as this exempt FBT for zero to low emission vehicles do make businesses take a second look at them while in the past they might have skipped over the electric / hybrid cars all together.

If you have any questions or concerns, contact your friendly local Power Tynan Business Advisor who will be more than happy to discuss this topic with you.




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