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Electric Vehicles and FBT Exclusion

Electric Vehicles (EVs) and Fringe Benefits Tax (FBT) Exemption

The Australian government has introduced an FBT exemption for certain electric vehicles (EVs) to encourage their adoption and promote environmental sustainability. Here's an overview of the EV FBT exemption and its implications:

FBT Exemption for Electric Vehicles

Since July 1, 2022, employers are exempt from paying FBT on the private use of eligible EVs provided to their employees.  This exemption applies to battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) (up until 1 April 2025) that meet specific criteria, such as having zero or low emissions, held and used after 1 July 2022 and used by an employee or their associates.

The FBT exemption aims to make EVs more attractive for employers to provide as part of salary packaging arrangements, potentially increasing their uptake, and reducing carbon emissions from the transport sector.

Reporting Requirements for Exempt EVs

Despite the FBT exemption, employers are still required to report the notional taxable value of the EV benefit on the employee's income statement if it exceeds $2,000 in an FBT year.  This notional taxable value is calculated using either the operating cost method or the statutory fraction method, like non-exempt vehicles.

However, employees can reduce the notional taxable value by claiming a contribution for the cost of electricity used to charge the EV at home, provided they are not reimbursed for these charging costs. This contribution can be calculated based on the actual electricity costs or using a cents-per-kilometre rate, which requires the employee to maintain records of the kilometres travelled during the FBT year.

Administrative Challenges

The reporting requirements for exempt EVs have introduced administrative complexities for employers. They must calculate the notional taxable value, consider employee contributions for charging costs, and include the reportable fringe benefit amount (RFBA) on the employee's income statement when finalising their Single Touch Payroll (STP) for the year.

If you have any questions regarding RFBA and finalising STP for the year please get in touch with your Client Manager.

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