New legislation before Parliament, if enacted, will make zero or low emission vehicles FBT-free. So who can access the concession and how?
Making Electric vehicles (EVs) FBT-free is just the first step in the Government’s plan to make zero and low emission vehicles the car of choice for Australians.
How the EV FBT exemption will work
The proposed FBT exemption is intended to apply to cars provided by an employer to an employee under the following conditions:
-Low and zero emission cars
-The car was first held and used on or after 1 July 2022 -Value below luxury car tax threshold for fuel efficient vehicles
If an electric car qualifies for the FBT exemption, then associated
benefits relating to running the car for the period the car fringe benefit is
provided, can also be exempt from FBT. Government modelling states that if an EV valued at about
$50,000 is provided by an employer through this arrangement, the FBT exemption
would save the employer up to $9,000 a year.
Can I salary sacrifice an electric car?
Assuming your employer agrees, and the car meets the
criteria, salary packaging is an option. While some FBT concessions are not
available if the benefit is provided under a salary sacrifice arrangement, the
exemption for electric cars will be available. For a salary sacrifice
arrangement to be effective for tax purposes, it needs to be agreed,
documented, and in place prior to the employee earning the income that
they are sacrificing. Government modelling suggests that for individuals using a
salary sacrifice arrangement to pay for a $50,000 electric vehicle, the saving
would be up to $4,700 a year.
Who cannot access the FBT exemption?
Your business structure makes a difference
By its nature, the FBT exemption only applies where an
employer provides a car to an employee. Partners of a partnership and sole
traders will not be able to access the benefits of the exemption as they are
not employees of the business. When it comes to beneficiaries of a trust and
shareholders of a company it will be important to determine whether the benefit
will be provided to them in their capacity as an employee or director of the
entity.
Exemption is limited to cars
As the FBT exemption only relates to cars, other vehicles
like vans are excluded. Cars are defined as motor vehicles (including
four-wheel drives) designed to carry a load less than one tonne and fewer than
nine passengers.