In the current climate, employers need to become savvier in their attempts to attract staff. One way to achieve this has always been through the provision of certain exempt fringe benefits such as laptops and mobile phones.
Due to a recent amendment to the Fringe Benefits Tax (FBT) Act which received royal assent on 12 December 2022, electric cars are now also exempt, which has been welcome news for those interested in an electric vehicle, provided these conditions are met:
- The car is a zero or low emissions vehicle – a battery electric vehicle, hydrogen fuel cell electric vehicle or a plug-in hybrid electric vehicle which is designed to carry a load of less than one tonne and fewer than nine passengers (including the driver).
- The first time the car is both held and used is on, or after, 1 July 2022.
- The car is used by a current employee or their associates (such as family members).
- Luxury car tax (LCT) has never been payable on the importation or sale of the car.
It is important to note that from 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law. However, you can continue to apply the exemption if both the following requirements are met:
- Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025.
- The employer has a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025. For this purpose, any optional extension of the agreement is not considered binding.
If you are an employer already providing vehicles as part of your salary sacrifice arrangements, there are definite savings if you convert your employees to salary sacrificing a zero or low emissions vehicle. There are also savings from an employee’s perspective, as they no longer have to salary sacrifice the fringe benefits payable on those vehicles.
However, unlike other exempt fringe benefits, any fringe benefit on an exempt electrical car will be included as a reportable fringe benefit, most likely involving an additional administration cost to the employer as they’ll be required to keep accurate records to be able to calculate the taxable value of the vehicle.
All in all, this new exemption seems to be a win/win both from an environmental perspective as well as attracting future staff, especially if an employer hasn’t provided these benefits previously because they have been subject to fringe benefits tax.
This article first appeared in the Autumn 2023 issue of HLB Mann Judd Perth’s Client Alert.