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Electric Vehicles: FBT (Fringe Benefits Tax) Free

FBT (fringe benefits tax) is a tax that employers pay on benefits paid to an employee (or their associate, such as a family member) in addition to their salary or wages.

For those businesses who need to report on FBT, legislation which received the Royal Assent on 12 December 2022 may be of interest.

This legislation provides an exemption for fringe benefits relating to electric cars (EV), subject to certain requirements.

Government modelling states that if an EV valued at approximately $50,000 is provided by an employer through this arrangement, the FBT exemption would save the employer up to $9,000 a year.

And, you do not pay FBT if you provide private use of an electric car that meets all of the following conditions:

· The car is a zero or low-emissions vehicle

· 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

Making electric vehicles FBT-free is seen as the first step in the Government’s plan to make

zero and low-emission cars the choice for Australians, focussing on affordability and overcoming “range anxiety” by:

· Cutting import tariffs

· Placing EV fast chargers once every 150 kms on the nation’s highways

· Creating a national Hydrogen Highways refuelling network, to deliver stations on Australia’s busiest freight routes

· Converting the Commonwealth fleet to 75% no-emissions vehicles

Can I salary sacrifice an electric car?

Provided your employer agrees, and the car meets the specified criteria, salary packaging for electric vehicles is an option.

Government modelling suggests that for individuals using a salary sacrifice arrangement to pay for a $50,000 electric vehicle, the saving would be up to $4,700 a year.

If you’d like to discuss fringe benefits tax, tax planning and tax liability across your business contact the team from Hub Advisory Group on 4926 8000 for an appointment.

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