Thinking about getting an electric vehicle but concerned about the initial costs? The electric vehicle Fringe Benefits Tax (FBT) exemption is a government initiative to make owning an EV more accessible and affordable for many Australians.

In recent years, the shift towards electric vehicles (EVs) has gained significant momentum, driven by growing environmental concerns and a desire for advanced technology. And with the increasing number of government incentives available for electric vehicles, Australia's electric vehicle market is looking to gain more traction. 
But what exactly is the Electric Vehicle FBT exemption and how can it benefit you? In this comprehensive guide, we'll explore the ins and outs of the Electric Vehicle FBT exemption, breaking down its benefits, savings and what vehicles are eligible.

Gear up for what’s inside:

1. What is the Electric Vehicle Fringe Benefits Tax (FBT) Exemption?
2. What Does the Electric Vehicle FBT Exemption Mean for Electric Car Buyers?
3. How to Break Down the Savings from the FBT Exemption?
4. FBT Exemption vs Standard Loan: Which is Better for Your Electric Vehicle?
5. How to Determine the Taxable Value of your Electric Vehicle
6. FBT Exemption: Luxury Car Threshold
7. Electric Vehicle FBT Exemption: Which Cars Are Eligible?
8. Plug into Savings: Get an Electric Vehicle Through a Novated Lease Now  

What is the Electric Vehicle Fringe Benefits Tax (FBT) Exemption?

To understand the electric vehicle FBT exemption, we first need to grasp what Fringe Benefits Tax (FBT) is. FBT is a tax employers pay on certain benefits they provide to their employees, including their families and associates. These benefits are separate from the salary or wages an employee receives and can include things like private use of a company car, low-interest loans, or gym memberships.

The FBT exemption for electric vehicles specifically targets the benefits associated with providing an electric car for employee use. This exemption means that employers do not have to pay FBT on electric vehicles that meet certain criteria, making it more financially appealing to offer Electric Vehicles (EVs) as part of a salary package.

What Does the Electric Vehicle FBT Exemption Mean for Electric Car Buyers? 

For both employers and employees, the electric vehicle FBT exemption offers substantial savings and incentives. Here’s how:

Cost Savings

Employers can save on the FBT they would typically pay for providing a company car, reducing overall business expenses. These savings can be passed on to employees, making electric vehicles a more attractive option within salary packages.

Environmental Impact

By encouraging the use of electric vehicles, the exemption supports a reduction in greenhouse gas emissions, aligning with broader environmental goals and corporate social responsibility strategies.

Employee Benefits

Employees gain access to modern electric vehicles at a lower overall cost, often including maintenance and running costs as part of the package. This can lead to significant personal savings and the convenience of driving a new, eco-friendly vehicle.

Additional Savings

Beyond the direct FBT savings, there are other financial incentives and benefits associated with electric vehicles.

Reduced Running Costs

Electric vehicles typically have lower running costs compared to petrol or diesel vehicles. Electricity is cheaper than fuel, and maintenance costs are often lower due to fewer moving parts.;

Government Incentives

Various state and federal incentives further reduce the cost of purchasing and operating electric vehicles. These can include rebates, reduced registration fees, and grants.

How to Break Down the Savings from the FBT Exemption?

Understanding the financial benefits of the electric vehicle FBT exemption requires a closer look at the numbers. Let’s break down the potential savings:
 

Consider a mid-range electric vehicle with a purchase price of $60,000. Here’s how the FBT exemption could impact the cost:

FBT is calculated annually, with the FBT year running from 1 April to 31 March. While the rate of tax can change each year, it’s currently set at 47% of the fringe benefit's value.
In this scenario, the employee saves $28,200 annually by opting for an electric vehicle that qualifies for the FBT exemption. This way, employees can enjoy a sizeable tax saving when leasing an electric car.

FBT Exemption vs Standard Loan: Which is Better for Your Electric Vehicle?

Deciding between an FBT-exempt novated lease and a standard car loan for your electric vehicle? Here’s a quick comparison to help you out:

• FBT Exemption: With a novated lease on an eligible electric vehicle, you won’t pay Fringe Benefits Tax, meaning huge savings on your overall costs. Plus, all running expenses—like fuel, insurance, and servicing—are bundled into one easy payment, taken from your pre-tax salary.
• Standard Loan: While a standard loan offers flexibility in how you repay, you won’t benefit from the same tax savings. You’ll also need to manage and pay for running costs separately.

If you're after maximised savings and convenience, an FBT-exempt novated lease is often the smarter choice.

How to Determine the Taxable Value of your Electric Vehicle

When it comes to calculating the taxable value of an electric vehicle under a novated lease, there are two easy methods:

• Statutory formula – a flat 20% of the car’s base cost (including GST and luxury car tax, but excluding registration and stamp duty).
• Operating cost – based on the actual private use percentage, usually for vehicles with high business use, requiring logbook records.

While the employer is liable for FBT, post-tax contributions from the employee often reduce the FBT to zero. This only applies if the vehicle isn't an eligible EV or PHEV exempt from FBT.

FBT Exemption: Luxury Car Threshold

Many Australians are keen to take advantage of the FBT exemption to save on costs. But what happens when your dream electric vehicle exceeds the luxury car threshold?

The luxury car threshold is the maximum value that a vehicle can cost before it is classified as a ‘luxury car’ for tax purposes in Australia. For the 2023-2024 financial year, the luxury car tax (LCT) threshold for fuel-efficient vehicles, which includes electric vehicles, is set at $89,332. This figure is important because it impacts how much you can claim in tax deductions and benefits.

If the electric vehicle costs more than $89,332, the FBT exemption still applies to the first $89,332 of the vehicle’s price. Any value above that threshold won't be subject to the FBT exemption, meaning you’ll likely have to cover additional costs on the luxury portion of the car.

In simple terms: the exemption helps with a portion of the vehicle's cost, but you won't avoid FBT altogether if your car exceeds the luxury limit.

The Electric Vehicle FBT Exemption: Which Cars are Eligible?

Not all electric vehicles qualify for the FBT exemption. To be eligible, vehicles must meet specific criteria set by the Australian government. Generally, the key requirements include:

1. Fully Electric or Plug-In Hybrid: The vehicle must be either fully electric (BEV) or a plug-in hybrid (PHEV). Standard hybrids that cannot be plugged in do not qualify.
2. Value Cap: Some exemptions apply only to vehicles below a certain value cap. This ensures that the benefits are targeted towards making more affordable electric vehicles accessible.
3. Use Criteria: The vehicle must NOT be used primarily for business purposes. There are specific rules around personal use that must be adhered to

Examples of Eligible Electric Vehicles 

Here are some examples of electric vehicles that could be eligible for the FBT exemption:

•  Tesla Model 3: A popular choice due to its range, performance, and brand reputation. The standard model typically falls below the value cap.
•  Nissan Leaf: An affordable and reliable option with a proven track record in the electric vehicle market. 
•  Hyundai Kona Electric: Known for its range and features, making it a competitive choice in the mid-range category. 
•  MG ZS EV: An entry-level electric SUV offering great value for money and meeting the eligibility criteria. 

Discover other electric vehicle models eligible for the FBT exemption here.

Non-Eligible Vehicles

 Vehicles that do not meet the fully electric or plug-in hybrid requirement or exceed the value cap are not eligible for the FBT exemption. It’s crucial to verify the eligibility of a specific model before proceeding with a novated lease or salary packaging arrangement.

Plug into Savings: Get an Electric Vehicle on a Novated Lease.

With the electric vehicle FBT exemption in place, there's never been a better time to make the switch than today.

Whether you’re an employer looking to enhance your employee benefits package or an employee seeking to drive an eco-friendly vehicle, understanding the electric vehicle FBT exemption is key to making an informed decision. 

Plug into the savings, embrace the future of driving, and let us help you get behind the wheel of your dream electric vehicle today.

 Contact Novated Choice now and take the first step towards maximising your tax savings.