What is FBT?

Fringe Benefits Tax (FBT) is a tax paid by employers on certain benefits provided to their employees or their employees’ family members and associates.

FBT and Electric Vehicle Exemptions

Fringe Benefits Tax (FBT) Exemption 
Applies to car benefits if:  

• You allow current employees or their associates to use zero or low emissions vehicles (electric vehicles) for private use. 
• The electric vehicle is considered available for private use under FBT law. 

Plug-in hybrid electric vehicles are no longer eligible for the exemption from 1 April 2025, unless:  

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

Car Lease Arrangements

• If an employer or lessor provides an employee with the use of a car through a lease arrangement, the benefit provided is only a car benefit if the car lease arrangement is a bona fide car leasing arrangement. 

 Associated Benefits

• Certain car expenses provided with the electric vehicle are also exempt from FBT. 
• These are not included when calculating if an employee has a reportable fringe benefits amount. 

 Home Charging Stations

• Providing an employee with a home charging station is a fringe benefit, but it is not an exempt associated benefit. 

Salary Sacrifice Arrangements 

• Even if an exemption applies for the electric vehicle car benefit, you still need to work out the taxable value of the car benefit provided. 
• This value is used to determine if the employee has a reportable fringe benefits amount (excluding associated car expense benefits). 
• Employees do not pay income tax on the reportable fringe benefits amount, but it impacts their income.

Electric Vehicles and claiming car running costs: 

• The motor vehicle expenses you can claim for electric cars are the same as those for cars using fuel. 
• The calculation methods depend on your entity type (sole trader, partnership, company, etc.), so ensure you use the correct method.

FBT, EV’s and Employee Reporting

An FBT exemption may apply to car benefits arising if: 

• You allow your current employees (or their associates) to use a zero or low emissions vehicle (electric vehicle) for their private use. 
• The electric vehicle is considered available for your current employees’ (or their associates’) private use under FBT law. 
• From April 1, 2025, private use of a plug-in hybrid electric vehicle is no longer eligible for the exemption unless specific conditions apply. 
• Associated benefits arising from certain car expenses provided with the electric vehicle are also exempt from FBT. 
• Providing your employee with a home charging station is a fringe benefit (not an exempt associated benefit). 
• Even if an exemption applies for the electric vehicle car benefit, you still need to work out the taxable value of the car benefit provided. 
• An employee’s reportable fringe benefits amount is reported on their income statement or payment summary. 
• Employees do not pay income tax on this amount, but it impacts their income tests and thresholds for family assistance, child support assessments, and other government benefits and obligations
  Although the private use of an eligible electric car is exempt from FBT, the benefit is reportable. You will need to work out the notional taxable value of the benefits associated with the private use of the exempt electric car. 
• Remember, if your employee uses an electric vehicle for private purposes, you’ll need to assess whether the FBT exemption applies and calculate the relevant values accordingly.

What is and is not exempt from FBT:

Global Positioning System (GPS) Subscription 

• A periodic GPS subscription is not considered a car running expense. 
  Therefore, it is not exempt from Fringe Benefits Tax (FBT). 

Car Parking Expenses

• When charging an electric vehicle at a commercial charging facility, car parking expenses related to it are separate from the electricity (fuel) cost. 
• These car parking expenses are not considered car expenses and are not exempt from FBT. 
• Normal car parking fringe benefits rules apply when providing car parking to employees. 

Provision of Electric Vehicle Charging Station at an Employee’s Home

• Charging an electric vehicle using electricity is considered a car expense. 
  However, the purchase of an electric vehicle charging station itself is not a car expense. 
• Providing an electric vehicle charging station to an employee is considered a property fringe benefit. 
• Reimbursing an employee for the cost of purchasing and installing a charging station is an expense payment fringe benefit, subject to FBT. 
• If home charging infrastructure is part of a lease arrangement, the charging station cost must be separately identified to ensure proper FBT treatment. 

Electric Vehicle Charging Station on Business Premises: 

• Installing an electric vehicle charging station on business premises makes it a capital asset of the business. 
• When providing electricity to employees for charging electric vehicles (as a car benefit), it is considered a car expense. 

Tax Deduction for Electric Vehicles (EVs) in Australia by Business Structure

In Australia, the tax treatment of electric vehicles (EVs) varies depending on the business structure. Here is a summary of how different business structures can claim tax deductions for EVs: 

Conclusion:  

In Australia, electric vehicles (EVs) are treated similarly to fuel-powered cars when it comes to claiming motor vehicle expenses. However, the calculation methods depend on your entity type (e.g., sole trader, partnership, company).
Additionally, there is an FBT exemption for EVs if you allow employees to use zero or low emissions vehicles for private use. From April 1, 2025, plug-in hybrid EVs are no longer eligible for this exemption unless specific conditions apply. Associated benefits from certain car expenses provided with EVs are also exempt from FBT.

Remember that even if an exemption applies, you still need to calculate the taxable value of the car benefit provided. Employee reporting includes the reportable fringe benefits amount on income statements or payment summaries, impacting income tests and thresholds for family assistance and child support assessments. 

References

Australian Taxation Office. (n.d.). Electric cars exemption. Retrieved from https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption  
Green Vehicle Guide. (n.d.). Electric vehicle information. Retrieved from https://www.greenvehicleguide.gov.au/pages/LowAndZeroEmissionVehicles/ElectricVehicleInformation  
BHT Partners. (2023). Tax and electric vehicles for Australian businesses in 2023. Retrieved from https://www.bhtpartners.com.au/blog/tax-and-electric-vehicles-for-australian-businesses-in-2023/  
Perks. (2024). Tax benefits of electric vehicles. Retrieved from https://www.perks.com.au/insights/tax-benefits-of-electric-vehicles/  
KMT Partners. (n.d.). Navigating electric vehicle tax. Retrieved from https://kmtpartners.com.au/blog/navigating-electric-vehicle-tax/  
PwC Australia. (2024). 2024 FBT Series: What you need to know about vehicles, electric. Retrieved from https://www.pwc.com.au/tax/employment-taxes/2024-fbt-series-electric-vehicles.html  
Electric Vehicle Council. (n.d.). What is the FBT exemption and how does it reduce the cost of an EV? Retrieved from https://electricvehiclecouncil.com.au/docs/what-is-the-fbt-exemption-and-how-does-it-reduce-the-cost-of-an-ev/  
Daley. (n.d.). How does tax apply to electric cars? Retrieved from https://www.daley.com.au/how-does-tax-apply-to-electric-cars/  
Grant Thornton Australia. (n.d.). Electric vehicles – ATO clarifies some FBT issues. Retrieved from https://www.grantthornton.com.au/insights/client-alerts/electric-vehicles–ato-clarifies-some-fbt-issues/  
Walshs. (n.d.). Taxation of electricity for electric vehicles. Retrieved from https://walshs.com.au/taxation-of-electricity-for-electric-vehicles/  
Accru. (n.d.). Tax concessions on electric vehicles. Retrieved from https://www.accru.com/blog/tax-concessions-on-electric-vehicles/  
MT Corporate Advisory. (n.d.). Electric vehicles: What you need to know. Retrieved from https://mtcorp.com.au/electric-vehicles-what-you-need-to-know/  
Coleman Greig. (n.d.). Benefit from the Fringe Benefit Tax Exemption for Electric Vehicles. Retrieved from https://colemangreig.com.au/insights/blogs/how-to-benefit-from-fringe-benefit-tax-exemption-for-electric-vehicles/  
Australian Taxation Office. (n.d.). Claiming a tax deduction for motor vehicle expenses. Retrieved from https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/income-and-deductions-for-business/deductions/deductions-for-motor-vehicle-expenses  
Grant Thornton Australia. (n.d.). Electric Vehicles home charging costs – ATO guidance finalised. Retrieved from https://www.grantthornton.com.au/insights/client-alerts/electric-vehicles-home-charging-costs–ato-guidance-finalised/  
PwC Australia. (n.d.). Australia – Corporate – Deductions – Worldwide Tax Summaries. Retrieved from https://taxsummaries.pwc.com/australia/corporate/deductions  
Electric vehicles and fringe benefits tax | Legal database (ato.gov.au) 
Claiming electricity costs for charging electric vehicle | ATO Community , Claiming electric car running costs | ATO Community, Claiming electric car running costs | ATO Community. 
Reportable fringe benefits | Australian Taxation Office (ato.gov.au) 
Electric vehicles and fringe benefits tax | Legal database (ato.gov.au) 
Disclaimer

This content is provided for general purposes only and is not intended to constitute legal or other professional advice. Liability limited by a scheme approved under Professional Standards Legislation.
Prepared by: Connie Lacognata
Date: 18/06/2024