The clock ticks towards March 31st, the end of the Fringe Benefits Tax year. Employers are gearing up for “Check your Odometer Day” to report their car usage in the hopes of saving on their electric vehicle tax (EV FBT).
But under the hood, the ATO is cracking down on some problem areas when they notice there’s a mismatch of data.
What do I need to watch out for this year?
- The FBT exemption for electric plugin-hybrid electric vehicles won’t apply after 31 March 2025, unless it meets certain criteria.
- Exemptions on electric vehicles only apply to employees (and not partnerships or sole traders). If they purchase or lease the vehicle directly, it doesn’t apply, and not for home charging stations either.
- If your motor vehicle attracts Luxury Car Tax, than it won’t qualify for the FBT exemption.
- Reporting on electricity used by the car depends on whether you’re using the new “short-cut” method or not.
- The electric vehicle, to qualify for the EV FBT exemption, must be a car.
- To avoid the ATO at your door, if you have employees, register for FBT.
- Reimbursement for travel costs associated with travelling from home to place of work can be subject to FBT.
Let’s dive into these in more detail.
Electric vehicle changes
In late 2022, the Government introduced a tax break that meant employers could provide some electric vehicles to employees without the 47% fringe benefits tax on private use.
However, since then, be aware that from 1st April 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles unless:
- the vehicle met the for EV FBT conditions before this date and;
- the employee has entered into a committed agreement with you before 1 April 2024.
Otherwise, the EV FBT concession applies to electric cars if:
- The car was purchased on or after 1st July 2022
- The car’s 1st ownership is on or after 1st July 2022
- The car is a ‘Zero or low emissions vehicle’ approved by the government: electric or hydrogen fuel cell electric electric.
- The value of the car is below the luxury car tax (LCT) threshold for fuel efficient vehicles ($89,332 for 2023-24 financial year) at the time it is first sold in a retail sale.
In last year’s article, we made a video summarising and explaining these benefits, which gave businesses up $7,520 in savings each year:
Other EV FBT reporting to keep in mind:
EV = Electric Vehicle
LCT = Luxury Car Tax
FBT = Fringe Benefits Tax
The exemption only applies to employees – To quality for the FBT exemption, the employer needs to supply the vehicle to an employee. Including through a salary sacrifice agreement. Partners in a partnership and sole traders are not employees and cannot benefit from this.
If LCT applies to the car it will never qualify for the FBT exemption. For example, if the EV failed the eligibility criteria in 2022-23 when purchased, because it was above the luxury car limit of $84,916, selling it in 2023-24 for $50,000 does not make it exempt from FBT on resale. Likewise, if anyone, including a previous owner, used the car before 1 July 2022, it won’t qualify for the FBT exemption.
Home charging stations are not included in the exemption. The FBT exemption covers benefits such as registration, insurance, repairs or maintenance. But it does not include a charging station at the employee’s home. If the employer installs or pays for a home charging station, then this is a separate fringe benefit and you risk FBT at 47% of the taxable value.
FBT might not apply but you should do the paperwork as if it did. The FBT exemption may apply to employers, but the value of the fringe benefit is still considered when working out the reportable fringe benefits of the employee. This means the benefit’s value is reported on the employee’s income statement. Whilst your employees don’t pay income tax on reportable fringe benefits, it determines their adjusted taxable income. This can affect their Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and certain social security payments.
What about the cost of electricity? On 1 Febuary 2024, the ATO introduced a “shortcut” method in their guidelines (PCG 2024/2). You can apply a rate of 4.20 cents per kilometre to calculate reportable fringe benefits. If you’re not using this method, you must isolate and calculate the car’s electricity consumption accurately.
The exemption does not apply if the employee directly purchases or leases the EV. If an employee purchases or leases the EV and gets reimbursed through a salary sacrifice arrangement, the FBT exemption does not apply. This is because it’s not a car fringe benefit. However, the exemption could apply to novated lease arrangements if you structure them carefully.
Not all electric vehicles are cars. The EV needs to be a car – electric bikes and scooters do not count. Vehicles that carry a load of 1 tonne or more, or 9 passengers or more, are not classified as cars for FBT purposes.
If you’re not sure how to keep a logbook for your business’ vehicles, read our guide on how to simplify your FBT record keeping and what records to collect.
What else is the ATO looking at?
- Meal & Entertainment Fringe Benefits
- Travel Fringe Benefits
- Other Fringe Benefits
If you’re an employer: it is recommended that you register for FBT. If your business has provided entertainment, salary sacrifice arrangements, forgiven debts, paid for or reimbursed private expenses, or offered accommodation or living away from home allowances, you need to register for and to review your FBT position. The ATO targets businesses that aren’t registered for FBT.
When employees are provided meals or entertainment: if you provide business lunches, social functions (i.e. a Christmas party) or ticketed business events, you may be subject to FBT. This will depend on the following:
- Why are you providing the food or drink?
- What type of food or drink are you providing?
- When are you providing the food or drink?
- Where is the food or drink being provided?
When employees travel: distinguish between work-related travel and commuting from home to work. Recently, there’s renewed focus on how employee travel is reported for FBT.
- If they’re travelling while performing their work, it’s deductible and not subject to FBT.
- If they’re travelling from home to their place of work, it’s not deductible and can be subject to FBT.
This focus is following a Federal Court decision in the Bechtel Australia case. Employees were travelling as fly-in-fly-out workers between home and their worksite – involving flights, ferry and bus travel.
The Court found that the employer was liable for FBT in connection with the transport. It might seem opportunistic to get tax deductions on the more expensive travel costs. However, this case reminds employers that it’s the type of travel between locations that’s the deciding factor, not the mode of transport.
Revisiting the basics
Need a refresh on all the FBT rules involving cars and other fringe benefits given to employees? See our dedicated article on the subject.
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