The Australian government has recently passed the 2022 Treasury Regulations (Electric Vehicle Exemption) Amendment Bill, which provides for exemption from Fringe Benefits Tax (FBT) for electric vehicles. This move aims to promote the adoption of zero or low-emission vehicles and encourage businesses to incorporate them into their fleets. This article aims to discuss the practical implications of the FBT exemption for electric vehicles in Australia, including the recent changes, the effectiveness of the FBT exemption, and the vehicles that are eligible for the FBT exemption.
Recent Changes in FBT Exemption for Electric Cars
The 2022 Treasury Regulations (Electric Vehicle Exemption) Amendment Bill has been passed by the House and Senate, with two amendments, and received the King’s Assent on 12 December 2022. The first Senate amendment adds a final requirement to exempt plug-in hybrids beginning April 1, 2025. However, existing obligations for plug-in hybrids that had access to an exemption prior to April 1, 2025, will continue to be exempt. The second amendment requires the review to be carried out within the first three years of the operation of the FBT exemption and to be completed within 18 months of the end of the three-year period. This amendment also includes provisions that can be revised.
What Does FBT Exemption Mean?
The FBT exemption is $1,364 a month if a customer with a gross income of $95,000 buys a 2022 Tesla Model Y using a new 36-month lease through an employer, compared to $1,863 under the current rules. This may mean that your dollar income is reduced. Employers are also winners of the FBT exemption as it eliminates FBT liability for company-owned electric vehicles offered as part of employee pay packages for personal use.
Effectiveness of FBT Exemption for Electric Vehicles
While the FBT exemption is a step in the right direction for promoting the adoption of electric vehicles in Australia, it may not be enough to achieve the government’s emissions reduction targets. In order to effectively reduce carbon emissions and promote sustainable transport options, a range of policies and incentives will need to be implemented.
The FBT exemption is just one piece of the puzzle, and additional measures such as subsidies for electric vehicle purchases, investment in charging infrastructure, and support for renewable energy sources will also be necessary. Without a comprehensive approach, the impact of the FBT exemption may be limited.
Eligible Vehicles for FBT Exemption
The FBT exemption applies to vehicles that meet certain criteria, including:
- Electric vehicles that are designed or adapted to be propelled solely by an electric motor and have a battery capacity of at least 4 kilowatt-hours (kWh).
- Plug-in hybrid electric vehicles are designed to be propelled by a combination of an electric motor and a petrol or diesel engine and have a battery capacity of at least 15 kWh.
- Fuel cell electric vehicles are designed or adapted to be propelled solely by an electric motor and derive their power from a fuel cell that produces electricity from hydrogen.
It is important to note that the FBT exemption only applies to vehicles that are used for business purposes and not for personal use. The exemption also applies only to vehicles first acquired on or after 1 April 2022.
FBT-exemption benefits for vehicles
The FBT exemption can benefit both individuals and businesses in several ways:
Lower costs for electric vehicles
One of the most significant benefits of the FBT exemption is the lower cost associated with owning an electric vehicle. By exempting these vehicles from FBT, the cost of leasing or purchasing an electric vehicle can be significantly lower than a traditional vehicle, making them more affordable for individuals and businesses alike.
Reduction in operating costs
In addition to the initial cost savings, electric vehicles are generally cheaper than traditional petrol or diesel vehicles as they require less maintenance and lower fuel costs.
Reduced carbon emissions
Using electric vehicles can also reduce carbon emissions, which can be a significant benefit for those looking to reduce their carbon footprint. By choosing an electric vehicle over a traditional petrol or diesel vehicle, individuals and businesses can contribute to a more sustainable future.
Business benefits
Businesses that provide electric vehicles to their employees can also benefit from the FBT exemption. By providing electric vehicles as part of their employee remuneration package, businesses can reduce their FBT liability, resulting in cost savings. In addition, electric vehicles can also be used as a marketing tool to promote the business’s commitment to sustainability.
Government incentives
In addition to the FBT exemption, a range of other government incentives are available for electric vehicle owners, including rebates, grants, and exemptions from road tolls and parking fees. These incentives can further reduce the costs associated with owning an electric vehicle and encourage more people to make the switch.
Conclusion
The FBT exemption for electric vehicles is a positive step towards promoting sustainable transport options in Australia. It can lower the costs of electric vehicles, reduce carbon emissions, and benefit both individuals and businesses. However, the impact of the FBT exemption may be limited without additional policies and incentives to support the transition to electric vehicles.
It is also important to note that the FBT exemption is just one of many government incentives available for electric vehicle owners. By combining these incentives with a comprehensive approach to sustainable transport, the government can encourage more people to switch to electric vehicles and help reduce Australia’s carbon emissions.
