A recent Bill has been introduced on the 27th of July 2022 indicates an electric future is closer than ever.
If the Bill is passed, an electric vehicle meeting the qualifications purchased after July 1st, 2022, may be eligible for government removed or reduced Fringe Benefits Tax (FBT). Along-side this, the government will also exclude many electric cars from the import tariff of 5%.
The Bill is proposed to remove Fringe Benefits Tax (FBT) on eligible electric cars provided by employers to current employees for private use. This change is welcome news for both employers and employees and gives effect to the Government’s pre-election promise to make electric, plug-in hybrid, and hydrogen cars exempt from FBT.
Eligible electric cards include:
- A battery electric vehicle, which is a car that:
- Uses only an electric motor for propulsion
- Is not fitted with a fuel cell or an internal combustion engine.
- A hydrogen fuel cell electric vehicle, which is a car that:
- Uses an electric motor for propulsion
- Is equipped with a fuel cell for converting hydrogen to electricity
- Is not fitted with an internal combustion engine.
- A plug-in hybrid electric vehicle, which is a car that:
- Uses an electric motor for propulsion
- Takes and stores energy from an external source of electricity
- Is fitted with an internal combustion engine for the generation of electrical energy and/or propulsion of the car. This means that a car with an internal combustion engine will only qualify for the exemption if it can be recharged by an off-vehicle power source.
For the exemption to take into effect, the car must be below the luxury car tax threshold, which is $84,916 for the 2022/23 financial year. Second-hand vehicles may qualify for these exemptions, as long as it was originally purchased after July 1st, 2022. To qualify for the exemption, the vehicle must be considered a ‘plug-in’ electric car with ‘zero or low emissions’, other vehicles under the electric division are currently not being included in this change.
This FBT exemption means that employees will be able to pay for all of their car expenses ‘pre-tax’. Effectively, this is the same as claiming 100% of the expenses related to running your vehicle on your tax return. This will lower the overall amount of tax that you will have to pay the ATO. Energy minister Chris Bowen has stated that it could save individuals who salary sacrifices up to $4,700 a year, or $9,000 for employers who provide EV vehicles.
This scheme is not available to everyone. The individual must have the ability to make a salary sacrifice. If enacted, this will apply to the FBT year that ends on 31 March 2023.
If you have an electric vehicle or are looking at purchasing one, contact the experienced Accountants at Greenhalgh Pickard today!
**Note that the information is provided as a guide and the Bill is not yet approved, for more information and relevant facts contact the team at Greenhalgh Pickard.