A guide to the Fringe Benefit Tax Exemption

In last year’s federal budget, it was announced that all eligible electric vehicles provided by employers to current employees for private use will be exempt from the Fringe Benefit Tax (FBT).  All cars up to the retail value of $84, 916 will be free from FBT.

Any zero or low emission vehicles such as electric vehicles, hydrogen fuel cell electric vehicles and plug-in electric vehicles will be rewarded with an exclusion from Fringe Benefit Tax.

What does the FBT exemption mean?

When a payment is made to an employee that is not a part of their salary or wages, it is known as a fringe benefit.  However, these benefits then become subject to the Fringe Benefit Tax which is calculated on the taxable value of the fringe benefit.

Previously, when an EV was placed on a novated lease under an employee’s salary package, it attracted FBT due to electric vehicles falling under the same category as any other motor vehicle. When the FBT exemption was released, it meant that employees could now salary package via a novated lease without the worry of any unexpected fees at tax time.

On a novated lease agreement (on an eligible EV, or similar), you save the 47% Fringe Benefit Tax and any payments associated with this lease will be deducted from you pre-tax income, saving you more at tax time!

How do I know if I’m eligible?

To be eligible for the FBT exemption, you must meet the following requirements provided by the Treasury Laws Amendment (Electric Car Discount Bill 2022)

  • The car is a low or zero emissions vehicle
  • The car must be first held and used after July 1 2022
  • The vehicle purchase price must fall below the Luxury Car Tax (LCT) threshold of $84,916.

If you have purchased a car second hand, you will need to determine if the first retail price was below/above the LCT threshold, ensuring that it was first made available after July 1, 2022.

It is important to note that any petrol hybrid cars, large vehicles (9 passengers or more) or any luxury electric cars will NOT qualify for the exemption.

Get in Touch

If you would like to discuss the Fringe Tax Benefit in more detail or find out if you’re eligible, get in touch today!

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