As part of the Federal Government’s climate policy, the government is rolling out several new initiatives to help encourage individuals and businesses to zero-emission vehicles. The programs include the Zero Emission Vehicle subsidy and the Fringe Benefits Tax (FBT) removal from electric vehicles with low-zero emissions.
Our advisors have prepared this article that explains how the new FBT policy will make electric vehicles more affordable for households and businesses by making these low-and zero emission cars exempt from FBT, potentially saving buyers more than $30,000.
What types of vehicles are included in the scheme?
The scheme includes electric vehicles that are Battery Electric Vehicles or Plug-in Hybrid Vehicles and internal combustion engine hybrids now also until April 1, 2025.
What does this mean for business owners?
The fringe benefits tax exemption will apply to electric vehicles purchased below the $84,916 threshold since July 1 2022.
Which means that employers will no longer need to pay FBT on electric vehicles provided as part of a salary packages. So, for example, a Tesla valued at $64,000 currently results in a company FBT charge of around $12,500, according to Treasury calculations.
It is important to note however, that despite the FBT exemption, the employer will still need to determine the notional taxable value of the benefits provided, and include it in their employee’s reportable fringe benefits amount (RFBA). The RFBA must be reported through Single Touch Payroll or on the employee’s payment summary. While not taxable, an employee’s total RFBA is taken into account in determining their eligibility for certain government benefits and concessions such as family assistance or child support assessments.
What does this mean for individuals?
The FBT exemption would mean an individual with a gross income of $95,000 using a 36-month novated lease through their employer to purchase a 2022 Tesla model Y would see their take-home pay reduced by $1364 a month, compared to $1863 under the current rules.
If you are not ready to take the plunge, the scheme will hopefully deliver a more affordable second-hand market as cars are rolled off leases in one, two and three-years time.
How can Morrows Help?
If you are considering purchasing Electric Vehicles for your fleet or for yourself and would like to understand the tax implication, please reach out to your Morrows Advisor. Our experienced advisors can help calculate the FBT and help you decide if it’s the right choice based on your circumstances.
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