DEALERS can save significant FBT by mixing zero or low emission vehicles (ZLEVs) into their FBT car pools.
Since ZLEVs are assigned a zero value for FBT purposes via the electric cars exemption then a fleet of such vehicles for a dealership’s staff could conceivably incur zero FBT liability as well.
FBT pools are not mere stock lists; they catalogue the vehicles available for daily use by staff, and are an integral part of the FBT puzzle.
Given that dealership staff are in vehicles and in motion every day, managing their mobility and maintaining accurate records can be a logistical challenge.Therefore, by extension, if the entire pool of vehicles available to staff comprises ZLEV models, the pool value would theoretically be nil.
FBT, by any measure, constitutes a substantial tax for dealerships, equally borne by both the employer and its employees.
To diminish this fiscal burden, while simultaneously exhibiting environmental consciousness, amounts to a collective pay rise through reduced taxes and potentially lower employee FBT contributions.
Considering the escalating costs associated with electric vehicles and the often-overlooked inclusion of car parking in FBT calculations (a quietly influential factor), dealer groups need to direct their ZLEV models to the FBT pool to reduce the FBT expense line.
Importantly, by having only a portion of the FBT pool represented by ZLEVs, dealers can effectively eliminate the FBT expense.
Worked examples:
Assumptions (constant through the below examples):
FBT pools utilised by the dealer group
Statutory rate utilised (20%)
Employee pays $50 contribution per week
Gross up rate utilised is 2.0802
FBT rate is 47%
Example 1: Dealer group with only new (non ZLEV) vehicles in the FBT pool.
As you can see from the above worked example, FBT can be an onerous taxation cost for car dealer groups. The average cost after employee contributions for the dealer group is $5,437.30 per year per employee provided a car benefit. By having say, 140 employees who are provided the car benefit, the total FBT bill for the year is $761,221.68!
When you add in used cars to the FBT pool, the FBT liability reduces. This has been in practice for some time for dealer groups.
Example 2: Dealer group with New and Used cars in FBT pool.
As you can see, by reducing the average base value of the pool, the FBT liability can almost halve per the worked example above. The FBT payable per employee is $3,097.05 which is significantly lower than the ‘only new’ example. This is an important reminder for dealer groups to make sure they have accurate records to keep their FBT expenses minimised.
Enter the electric car FBT exemption.
From 1 July 2022, employers do not pay FBT on eligible electric cars and the associated car expenses.
This is a game changer for dealer groups in terms of FBT expense!
As ZLEV stock is becoming more available, dealers should seek to increase the mix of FBT pool cars that are ZLEV and are exempt from FBT. Below is an example following on from the above with 50 per cent of the FBT pool being ZLEVs.
Example 3: Dealer group with New, Used and ZLEVs (50% of total) in FBT pool.
As you can see, the FBT liability nearly vanishes (when including employee contributions) with only 50 per cent of ZLEVs in the FBT pool.
The FBT per employee provided the car benefit is $242.98 per year (after contributions).
In the business world, it is widely acknowledged that a dollar of tax saved or deferred equates to a dollar earned in profit. Within dealerships, FBT is a tax that wields its influence over every facet of the dealership’s interactions with its staff.
I would suggest that this change in FBT regulation is a call to action for dealers to revisit and dissect the FBT structures within their dealerships. It signals to dealers to begin to mix in ZLEVs in their FBT pools, and, in turn, bestowing a well-earned pay rise upon all stakeholders.
As always, get professional advice for your particular situation to ensure you comply with all FBT laws and regulations. If you need help with your FBT or any dealership taxes, Pitcher Partners Motor Industry Services are happy to assist.
Steven Bragg and John Gavljak are Partners in the Motor Industry Services division of Pitcher Partner Sydney.
By Steve Bragg and John Gavljak on 10th October 2023 Comment, Dealerships, Management Workshop, News FBT, Pitcher Partners
DEALERS can save significant FBT by mixing zero or low emission vehicles (ZLEVs) into their FBT car pools.
Since ZLEVs are assigned a zero value for FBT purposes via the electric cars exemption then a fleet of such vehicles for a dealership’s staff could conceivably incur zero FBT liability as well.
FBT pools are not mere stock lists; they catalogue the vehicles available for daily use by staff, and are an integral part of the FBT puzzle.
Given that dealership staff are in vehicles and in motion every day, managing their mobility and maintaining accurate records can be a logistical challenge.
Therefore, by extension, if the entire pool of vehicles available to staff comprises ZLEV models, the pool value would theoretically be nil.
FBT, by any measure, constitutes a substantial tax for dealerships, equally borne by both the employer and its employees.
To diminish this fiscal burden, while simultaneously exhibiting environmental consciousness, amounts to a collective pay rise through reduced taxes and potentially lower employee FBT contributions.
Considering the escalating costs associated with electric vehicles and the often-overlooked inclusion of car parking in FBT calculations (a quietly influential factor), dealer groups need to direct their ZLEV models to the FBT pool to reduce the FBT expense line.
Importantly, by having only a portion of the FBT pool represented by ZLEVs, dealers can effectively eliminate the FBT expense.
Worked examples:
Assumptions (constant through the below examples):
Example 1: Dealer group with only new (non ZLEV) vehicles in the FBT pool.
As you can see from the above worked example, FBT can be an onerous taxation cost for car dealer groups. The average cost after employee contributions for the dealer group is $5,437.30 per year per employee provided a car benefit. By having say, 140 employees who are provided the car benefit, the total FBT bill for the year is $761,221.68!
When you add in used cars to the FBT pool, the FBT liability reduces. This has been in practice for some time for dealer groups.
Example 2: Dealer group with New and Used cars in FBT pool.
As you can see, by reducing the average base value of the pool, the FBT liability can almost halve per the worked example above. The FBT payable per employee is $3,097.05 which is significantly lower than the ‘only new’ example. This is an important reminder for dealer groups to make sure they have accurate records to keep their FBT expenses minimised.
Enter the electric car FBT exemption.
From 1 July 2022, employers do not pay FBT on eligible electric cars and the associated car expenses.
This is a game changer for dealer groups in terms of FBT expense!
As ZLEV stock is becoming more available, dealers should seek to increase the mix of FBT pool cars that are ZLEV and are exempt from FBT. Below is an example following on from the above with 50 per cent of the FBT pool being ZLEVs.
Example 3: Dealer group with New, Used and ZLEVs (50% of total) in FBT pool.
As you can see, the FBT liability nearly vanishes (when including employee contributions) with only 50 per cent of ZLEVs in the FBT pool.
The FBT per employee provided the car benefit is $242.98 per year (after contributions).
In the business world, it is widely acknowledged that a dollar of tax saved or deferred equates to a dollar earned in profit. Within dealerships, FBT is a tax that wields its influence over every facet of the dealership’s interactions with its staff.
I would suggest that this change in FBT regulation is a call to action for dealers to revisit and dissect the FBT structures within their dealerships. It signals to dealers to begin to mix in ZLEVs in their FBT pools, and, in turn, bestowing a well-earned pay rise upon all stakeholders.
As always, get professional advice for your particular situation to ensure you comply with all FBT laws and regulations. If you need help with your FBT or any dealership taxes, Pitcher Partners Motor Industry Services are happy to assist.
Steven Bragg and John Gavljak are Partners in the Motor Industry Services division of Pitcher Partner Sydney.
By Steven Bragg and John Gavljak
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