The Fringe Benefits Tax (FBT) exemption for eligible electric vehicles (EV) is an attractive tax incentive available to Australian employers and employees.  With the increasing cost of fuel, it is an opportune time to re-visit the tax incentives available.

The EV FBT Exemption 

Broadly, to qualify for the FBT exemption, the vehicle must meet the following criteria:

• Be a zero- or low-emissions vehicle. All pure electric and hydrogen vehicles remain eligible (plug-in hybrid vehicles are only eligible if first held and used before 1 April 2025);
• First held or used on or after 1 July 2022;
• Used by a current employee or their associate (e.g., a family member); &
• Below the luxury car tax threshold of $91,387 for 2025-2026.

Registration, insurance, repairs, maintenance and fuel expenses provided for eligible electric cars are also exempt from FBT.

While the benefit is exempt from FBT, the taxable value of the benefit must still be determined when working out whether an employee has a reportable fringe benefits amount to be included on their income statement or payment summary.

Salary Packaging an EV

One of the biggest advantages of the FBT exemption is through salary packaging.  A typical arrangement includes:

• The employer leasing or purchasing the EV
• The employee agrees to a salary sacrifices arrangement
• The vehicle is used for private use
• No FBT being payable

In leasing the vehicle, referred to as a novated lease, employees can pay for the car and running costs from pre-tax income.  The GST can be claimed on lease payments, plus all running costs can be packaged within the lease.

Novated leases can also be set up for a spouse’s vehicle, where one partner is in a good position to take on the novated lease and the other partner drives the EV.

Please contact our office if you require further assistance.