ATO Update – How to easily determine the cost of charging your Electric Vehicles

As electric vehicles (EVs) continue to grow in popularity, many Australians are looking for a simple way to calculate the cost of charging their vehicle at home for tax and fringe benefits tax (FBT) purposes.

Unlike petrol or diesel vehicles, there is often no separate receipt for electricity used to charge an EV at home. To simplify record-keeping and calculations, the Australian Taxation Office (ATO) provides a standard home charging rate that can be used instead of calculating actual electricity costs.

With the ATO recently announcing an increase to the EV home charging rate, now is a good time for EV owners and employers to understand how the methodology works and whether it may apply to them.

What is the EV Home Charging Rate?

The ATO’s EV home charging rate provides a simplified method for calculating electricity costs associated with charging an electric vehicle at home.

Rather than tracking electricity usage and applying varying electricity tariffs, eligible taxpayers can calculate their charging costs by multiplying the total kilometres travelled by a prescribed cents-per-kilometre rate.

This methodology can be used for income tax and fringe benefits tax (FBT) purposes where the relevant eligibility requirements are met.

Current and Upcoming Rates

The current EV home charging rate is 4.2 cents per kilometre.

However, the ATO has announced that the rate will increase to 5.47 cents per kilometre from:

• 1 April 2026 for FBT purposes; and
• 1 July 2026 for income tax purposes.

The increase reflects changes in electricity costs and provides a higher allowance for eligible home charging expenses.

Example

If an electric vehicle travels 20,000 kilometres during the year:

For a vehicle travelling 20,000 kilometres annually, the increased rate results in an additional $254 of claimable charging costs.

Which Vehicles Are Eligible?

The EV home charging rate applies to battery electric vehicles and other eligible electric vehicles.

The ATO has also expanded the methodology to include plug-in hybrid electric vehicles (PHEVs). From 1 July 2024, for income tax purposes, and from the corresponding 2024-25 FBT year, eligible taxpayers and employers can use the EV home charging rate methodology to calculate home charging costs for PHEVs.

PHEV owners should note that the methodology differs slightly from that for fully electric vehicles, as both electricity and petrol costs may need to be considered, depending on how the vehicle is used and the records maintained.

As eligibility requirements can vary by vehicle and circumstances, professional advice should be sought before relying on the methodology.

Do You Have to Use the EV Home Charging Rate?

No. The ATO’s methodology is optional. Individuals and employers can choose to:

• Use the EV home charging rate; or
• Calculate the actual electricity costs incurred in charging the vehicle.

The method selected applies to a particular vehicle for the entire income year or FBT year. However, a different method may be used in future years if circumstances change.

For some taxpayers, calculating actual electricity costs may provide a more accurate result. For others, the simplified methodology can significantly reduce record-keeping requirements.

What Records Need to Be Kept?

To use the EV home charging rate, taxpayers should retain:

• Odometer readings at the beginning and end of the income year or FBT year.
• Electricity bills demonstrating home electricity costs were incurred.
• A logbook where required to substantiate business use.
• Additional records supporting any work-related or business-use claims.

Maintaining accurate records remains essential, even when using the simplified methodology.

For some taxpayers, the simplified rate will be easier to apply and support. For others, particularly where detailed electricity monitoring is available, the actual cost method may result in a more accurate result.

Special Considerations for Plug-in Hybrid Vehicles

While eligible plug-in hybrid electric vehicles (PHEVs) can now use the EV home charging rate methodology, owners may also incur petrol expenses when operating in hybrid mode.

Depending on how the vehicle is used and how records are maintained, petrol costs may need to be accounted for separately. PHEV owners should seek advice to ensure the correct treatment is applied.

What About Public Charging Stations?

Many EV owners charge their vehicles using a combination of home, workplace, and public charging stations.

The EV home charging rate is designed to estimate the cost of electricity used for home charging. Costs incurred at public charging stations can generally be claimed separately where appropriate records and receipts are maintained.

As the treatment can vary depending on how and where the vehicle is charged, professional advice may be beneficial where multiple charging methods are used throughout the year.

What Does This Mean for Employers?

Employers who provide electric vehicles to employees, whether through a company vehicle, a salary packaging arrangement, or a novated lease, should review the impact of the updated home charging rate.

The higher rate may impact FBT outcomes where vehicle benefits are provided to employees, as well as employee contributions and internal cost allocations. Employers should ensure they apply the correct rate for the relevant FBT year and maintain appropriate supporting documentation.

What Should You Do Now?

If you currently use the EV home charging rate:

• Continue using the 4.2 cents/km rate for the 2025-26 income year.
• Use the new 5.47 cents/km rate from 1 July 2026 for income tax purposes.
• Ensure your record-keeping processes are up to date.
• Review whether the simplified method or the actual cost method produces the best outcome for your circumstances.

How Can Morrows Help?

Electric vehicles can offer a range of tax, FBT and cost-saving opportunities, but understanding the rules can be challenging.

Whether you are considering purchasing an electric vehicle, introducing EVs into your business fleet, operating a novated lease arrangement, or simply want to understand the tax implications of charging your vehicle at home, our advisers can help.

For advice tailored to your circumstances, speak with your Morrows adviser.