Employers & employees set for big savings on electric cars with FBT discount

By Sally Storey, Partner

6 November 2022

In July, the Federal Government introduced the Treasury Laws Amendment (Electric Car Discount) Bill 2022 into Parliament, which has the potential to save employers and employees many thousands of dollars off the annual running costs of electric vehicles. 

According to a joint statement from the Federal Treasurer, the Hon Dr Jim Chalmers MP, and the Hon Chris Bowen MP, Minister for Climate Change and Energy1, the “bill is good for motorists, good for employers and their workers, and good for climate action.”

The amendment implements the Government’s plan to remove the fringe benefits tax (FBT) to make electric cars cheaper so that more families who want them can afford them.

The legislation will amend the Fringe Benefits Tax Assessment Act 1986 to exempt the use of eligible electric cars made available by employers to employees from FBT.

This FBT exemption will apply to battery electric cars, hydrogen fuel cell electric cars and plug‑in hybrid electric cars.

The exemption will be available for eligible electric cars with a first retail price below the luxury car tax threshold for fuel-efficient vehicles ($84,916 for 2022‑23) first made available for use on or after 1 July 2022.

Significant savings for employers and employees

According to the Government, if an employer provides a model valued at about $50,000 through this arrangement, the FBT exemption would save them up to $9,000 a year.

Individuals using a salary sacrifice arrangement to pay for the same model would save up to $4,700 a year.

This measure forms part of the Government’s Electric Car Discount, reducing the up‑front and ownership cost of electric vehicles, addressing a significant barrier to their uptake.

The FBT exemption will be implemented as an ongoing measure and reviewed after three years in light of electric car take‑up to ensure it remains effective.

Of course, there is always some devil in the detail with amendments of this nature. For instance, the bill states it will apply to low emission vehicles first held, used and for private use by employees on or after 1 July 2022. Also, the car must not have been used before 1 July 2022, even by someone else. This rule means the vehicle must be a new car or if second-hand was new after 1 July 2022. Please note, it has not been made law at time of this publication.

__________________________

1 https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/electric-car-discount-bill-introduced-parliament?utm_source=miragenews&utm_medium=miragenews&utm_campaign=news

Disclaimer

The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.