The new FBT year is nearly upon us. Here's our helpful key reminders of current exemptions and inclusions, as well as upcoming changes to Fringe Benefits Tax reporting for the new year.
Continued Electric Vehicle Exemptions
EVs purchased since 1 July 2022 continue to be exempt from FBT.
Normally if a business-owned vehicle is used for private use, the employer is liable to pay FBT. However, in the case of an electric vehicle, full exemptions apply if it meets all of the following conditions. The car must be:
- A zero or low emissions vehicle
- First held and used on or after 1 July 2022
- Used by a current employee or their associates (e.g. family members)
- One that has never had the luxury car tax paid on it
This is inclusive of EVs provided to employees under a salary packaging arrangement.
Although the vehicle may be exempt from FBT it is still a reportable benefit that may need to be included on the employee’s income statement. Therefore, it's important to still record all costs associated with the car to determine the reportable fringe benefit amount. If the reportable benefit exceeds $2,000 it needs to be reported on an employee’s income statement.
The vehicle must be classified as a car for the exemption to apply; other electric vehicles such as motorcycles, bikes and scooters aren't included.
It's important to note that:
- When purchasing second-hand EVs that criteria two and four must still be met but can be hard to verify. Employers should consider this during the purchasing process and do their due diligence to obtain the car's sale history before buying.
- Plug-in hybrid electric vehicles will not be considered zero or low emission vehicles under FBT law from 1 April 2025.
Employers should consider this during the purchasing process and do their due diligence to obtain the car's sale history before buying.
Don't forget expenses associated with EVs eligible for the above are also exempt from FBT. These include:
- Registration and road user charges
- Insurance
- Repairs and maintenance
- Fuel (inclusive of electricity costs to charge and run the vehicle)
If an employer chooses to pay for or reimburse an employee for the costs of purchasing and installing a charging station at the employee’s residence this would not be covered under the exemption and may be subject to FBT.
Updates To Car Parking Benefits
Changes have been made to FBT car parking benefits and related definitions that could affect you.
As a result of the Taxation Ruling TR 2021/2, updates have recently been made to chapter 16 of the ATO's FBT Guide For Employer regarding car parking fringe benefits.
If you provide parking to your employee or their associate at a work car park, you could be providing them with a car parking benefit that is liable for FBT.
To determine if you are, all of the following must apply to your situation:
- Your employee or their associate parks a [car] in a [car space] at a [work car park] for a [minimum parking period] between 7am and 7pm
- The work car park is located at or [in the vicinity of] the employee's [primary place of employment] on that day
- The car must be:
- owned by or leased to the employee or their associate
- made available to the employee or their associate
- a pool car, or
- provided to the employee under a salary packaging agreement
- The employee used the car in connection with travel between their [place of residence] and their primary place of employment on the day the car was parked
- At least one [commercial parking station] is located within a 1km radius of the work car park
- The [lowest representative fee] charged to members of the public for [all-day parking] by the commercial parking station is above the car parking threshold rate ($10.40 for the FBT year ending 31 March 2024)
- The parking is not provided to an employee on a day when they are entitled to use a disabled car parking space and display a valid disabled car parking permit
Loan Fringe Benefit Interest Rate Increase
A loan fringe benefit occurs when you provide a loan to an employee with a low (or no) interest rate during the FBT year.
The ATO considers a low interest rate to be one below the statutory rate of interest. The statutory interest rate for the FBT year ending 31 March 2024 was increased from 4.52% to 7.77%.
If you are charging your employee an interest rate below this, the loan will be liable for FBT.
Changes To Employer FBT Record Keeping
The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 includes an update to the Fringe Benefits Tax Assessment Act 1986. The amendment, aimed at reducing the compliance burden for employers regarding record keeping for FBT, will apply from 1 April 2024.
Under the new law, employers will have a choice to use existing records for certain benefits in place of statutory evidentiary documents, such as travel diaries or employee declarations. This only applies if the Commissioner has made a legislative instrument prescribing the alternative records.
It's important to note that if you choose to use an alternative record for your FBT return, the information you're required to keep remains the same.
If you have any questions about accurate FBT record-keeping or want to understand your tax and reporting obligations, you can reach out to our trusted accounting advisors for personalised advice.
Megan is an Associate in Cutcher & Neale’s Specialist Medical Services Division and has over 20 years of industry experience.
Megan is an expert in the taxation field, with a niche specialisation in advising medical professionals.
