FBT Exemption for Electric Cars
On 12 December 2022, the government introduced new law to provide an FBT exemption in respect of eligible electric vehicles.
The exemption applies to a car benefit only if the earliest time when a person both held and used the car was at or after the start of 1 July 2022. Two distinct tests must be passed to qualify:
1. Whether the car was held by a person —being either owned by that person, leased to that person, or otherwise made available to that person by another person. This includes being held by an employer, an associate of an employer, or another person with whom an employer or associate has an arrangement relating to the use or availability of the car.
2. Whether the car was used or taken to be available for use.
The exemption will only apply if the first time that both tests are met is after 1 July 2022.
A second-hand electric car may qualify for the exemption, provided that the car was first purchased new on or after 1 July 2022.
A car must also satisfy the following criteria to qualify for the exemption:
- the car is a zero or low emissions vehicle when the benefit is provided; and
- the value of the car, at the first retail sale must be below the luxury car tax threshold for fuel efficient cars which is $84,916 for the 2022-23 income year.
The following cars are considered zero or low emission vehicles:
- Battery electric vehicles
- Hydrogen fuel cell electric vehicle
- Plug-in hybrid electric vehicle
Car fringe benefits for zero or low emissions cars that are exempt from FBT will be included for the purposes of determining a current employee’s reportable fringe benefits amount for each FBT year in which the exempt benefit is provided.
Salary Packaged Cars Stored on Business Premises
Generally a car parked on the business premises of an employer will give rise to a car benefit if the car is actually ‘applied to a private use’ by the employee (or an associate of the employee). A car that is parked on an employer’s business premises would create a car fringe benefit liability only where an employee was given permission to use the car for private purposes (e.g., the car is used to go shopping or visit family). In this case, a car fringe benefit arises because the car has been applied to a private use by the employee and this constitutes the provision of a car benefit, to the employee, on that day.
The ATO generally accepts that a non-salary packaged car that is parked on an employer’s premises will not be taken to be applied to a private use.
If a salary packaged car is parked on an employer’s business premises, then, it is being applied to a private use even if the car is not driven by an employee or an associate. This is because the term ‘private use’ encompasses any use of the car, not just driving it.
However, the ATO has confirmed that a salary packaged car is not considered to be ‘applied to a private use’, where an employee (or associate) is unable to access or use the car during the time it is parked on the business premises, for example if the employee is on extended leave. It is important that this understanding is documented between the employer and employee in writing to satisfy the ATO’s that the car was not available for private use during this time.
If you have any questions, please do not hesitate to contact our team.
