If you’ve ever wanted to take the plunge and do your bit for the environment, whilst still enjoying the convenience of a motor vehicle, there are interesting times ahead. To date, electric vehicles in Australia have tended to be expensive, and there have been question marks around the infrastructure of charging stations to support them.
In an interesting turn of events, the Australian government recently introduced draft legislation to parliament proposing an FBT exemption for electric vehicles and hybrid-low emissions vehicles, “to encourage a greater take up of electric cars by Australian road users to reduce Australia’s carbon emissions from the transport sector, by making electric cars more affordable.”
Prosperity Tax Manager Charles Yuan reviewed the proposed legislation and advises that the conditions under which a vehicle would be eligible for the proposed exemption are as follows:
- This only applies to vehicles that is delivered and ready to use from 1 July 2022 (but can be purchased before if delivery date is after 1 July)
- This only applies to vehicles able to be charged from external source, meaning for hybrids it must be a plug-in hybrid (PHEV).
- This only applies to vehicles below the luxury car tax limit, which is $84,916* for fuel efficient vehicles. So e.g. a base model Tesla Model 3 would qualify, but a Porsche Taycan would not
The other point to flag, is that though there would still be a reportable fringe benefit that would need to be assessed on a case-by-case basis with individual drivers, there are significant potential tax savings available through salary packaging these vehicles.
Click here to view examples of electric vehicles available in Australia
Click here to view examples of Plug-in Hybrid vehicles available in Australia
Although it may take months before we see a final version of this legislation enacted, we feel this is a very positive move by the Australian government, to not only take a more direct approach to reducing emissions from our vehicles on the road, but at the same time encouraging vehicle manufacturers to make more options available within the luxury car limit – which is bound to make both drivers and fleet buyers take note.
All of a sudden, buying an electric/low emission vehicle through a novated lease could be a great proposition for many drivers. Touch base with us if you’d like to discuss what this could mean for you and your business.
*Luxury Car Threshold for 2022-23. See Luxury car tax rate and thresholds | Australian Taxation Office (ato.gov.au) for more details.