The exemption, which was passed in the Treasury Laws Amendment (Electric Car Discount) Bill earlier this month, is designed to attract more employees to the benefits of an EV and plug-in hybrid (PHEV).

But although there is considerable upside on first glance, the Australiasian Fleet Managment Association’s executive director Mace Hartley urges caution.

AfMA said that the FBT was removed from EVs, PHEVs and hydrogen fuel-cell vehicles (up to the fuel efficient LCT threshold of $84,916) from July 1, 2022.

Using Treasury estimates, it said that employers could save up to $12,500 on the purchase of an EV for an employee and individuals could save up to $4300.

“But there are a couple of catches,” Mr Hartley told GoAutoNews Premium.

“The exemption only applies to EVs and hydrogen vehicles until June 30, 2025, and the exemption only applies up to March 31, 2025 for PHEVs.”

Mace Hartley

For novated lease and fleet customers, the FBT exemption is a big saving. An EV under the LCT could attract about $12,500 in FBT but eligible customers would be exempt.

Mr Hartley said employers paying FBT today will see their reportable FBT amount double for the employees “assuming the cost of the EV is double the value of the car it’s replacing.

“This will affect the employees’ access to many government benefits including but not limited to family allowance, private health care rebates, HEX debt repayments and child support.”

“I believe businesses will be hesitant to embrace the opportunity given uncertainty around the FBT treatment of an asset beyond June 2025 and wanting to avoid potential industrial action by doubling employees’ reportable fringe benefit amount.”

“There is more work required to make this successful.”

Mr Hartley said companies now adopting EVs and providing these for employees mean the vehicles will be garaged at the employees’ homes and therefore attract FBT.

“That will have a massive adverse effect on individuals – particularly those who are middle aged and have children at home – who have access to family allowance or child support,” he said.

“It can also affect those who are a bit younger with a HEX debt.

“The employee will be deemed to have that income from the use of the car.”

Mr Hartley said the FBT exemption wouldn’t push back the EV trend “but it will certainly take the shine off it.”

He said that the section of the industry that will probably maximise the benefit of the changes are those in salary packaging.

“Previously they would make post tax contributions, so they never incurred FBT,” he said.

“Now the package can be all out of pre- tax. So it will have a potential effect on an employees’ family allowance because the employee is paying for the car with pre- tax earnings.”

He said that some individuals get tax benefits that offset the losses or impact of the loss of government and allowances. 

“But if you’re just an average worker, and you get some home garaging rights, and now they replace your ICE car with an EV, your reportable fringe benefits could be close to double,”  he said.

“Wow. That’s really an impact no one saw coming.”

Mr Hartley said AfMA would this week start “some heavy advocacy” to point out to government the pitfalls of the changes and a plan to rectify it for employees.

As background, the Australian Taxation Office on October 19 issued this statement: “The Government has announced a proposal to:

• remove fringe benefits tax (FBT) on eligible electric cars from July 1, 2022, and
• include the value of these exempt car fringe benefits in the calculation of an employee’s reportable fringe benefits amount.

“This measure is not yet law. If enacted, this will apply from the FBT year beginning April 1, 2022. The Government intends to review this exemption after three years, to consider electric car take-up.”

By Neil Dowling