In today’s tight employment market, attracting and retaining top talent requires more than just competitive salaries. Employers are increasingly looking for creative, value-driven ways to enhance their remuneration packages.

One such strategy gaining traction is offering electric vehicles (EVs) as part of employee benefits. This approach not only appeals to environmentally conscious staff but can also provide significant tax advantages.

Under current legislation, employers are not required to pay Fringe Benefits Tax (FBT) on eligible EVs provided for private use by employees, making this an attractive option from both a financial and sustainability perspective.

To qualify for the FBT exemption, the EV must meet all the following criteria:

  • Vehicle type: It must be a battery electric vehicle, hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle (PHEV). However, it’s important to note that since 1 April 2025, PHEVs are no longer considered zero or low-emissions vehicles under FBT law
  • Vehicle specifications: The car must be designed to carry a load of less than one tonne and fewer than nine passengers (including the driver)
  • Timing: The car must be both first held and used on or after 1 July 2022
  • Usage: It must be provided for the use of a current employee or their associate (such as a family member)
  • Tax status: The vehicle must never have been subject to Luxury Car Tax upon importation or sale.

Additionally, several car-related expenses are also exempt from FBT when associated with an eligible EV. These include registration, insurance, maintenance, repairs, and even the cost of electricity for charging the vehicle.

However, it’s important to remember that while the vehicle and its related expenses may be exempt from FBT, they still count as a reportable fringe benefit. This means the value of the benefit must be included on the employee’s income statement, which can potentially impact their eligibility for government benefits or obligations such as HELP debt repayments.

Incorporating EVs into remuneration packages not only positions businesses as forward-thinking and environmentally responsible but also provides a financially savvy benefit that can set them apart in a competitive hiring environment. It’s a win-win, offering significant tax relief for employers, while helping employees lower their personal transport costs and reduce their carbon footprint.

As sustainability becomes a greater priority for businesses and workers, electric vehicles are emerging as a powerful tool for both talent acquisition and environmental leadership.

This article was written by Tung Pham, Manager Business Advisory at HLB Mann Judd Melbourne.