New legislation has entered parliament which gives an employer who provides an employee with an electric vehicle an exemption for fringe benefits tax on the employee’s private use.
The new legislation comes into effect for electric vehicles first held by employers on or after 1 July 2022.
To be eligible for the exemption, the electric vehicle must be below the luxury car limit, which is currently sitting at $84,916.
This exemption will allow you to salary package an electric vehicle from your employer (or via your business if you have a company or trust and employ yourself or a family member) to obtain a substantial tax benefit. The intention of this legislation is to improve the viability to purchase a new electric vehicle.
Definition of an electric vehicle
Electric vehicles that are first held and used on or after 1 July 2022 will be considered an exempt car benefit. To be eligble:
- the car must be a zero or low emissions vehicle, and
- the value of the car at the first retail sale must be below the luxury car tax threshold for fuel efficient vehicles.
Zero or low emissions vehicle
There are 2 major tests for a vehicle to come within the meaning of zero or low emissions exemption:
- The car must satisfy the general requirements in tax law to be considered a car. Generally, this is a motor vehicle designed to carry a load of less than one tonne and fewer than 9 passengers.
- An electric car must:
- Use one or more electric motors for propulsion, and
- Be fuelled by either an off-vehicle electrical power source, a battery, an electric generator, a hydrogen fuel cell, or a combination of these.
To avoid doubt, the definition of a zero or low emissions vehicle includes:
- battery electric vehicles
- hydrogen fuel cell electric vehicles, and
- plug-in hybrid electric vehicles.
Just bought one?
Don’t worry! An electric vehicle that was purchased before 1 July 2022 but delivered on or after 1 July 2022 may still be eligible for the exemption.
Please contact our office if you would like to know more about the exemption.
