As the annual close of the Fringe Benefits Tax (FBT) season approaches on March 31, it becomes imperative for business owners to arm themselves with knowledge about the intricacies of FBT and areas likely to capture the Australian Taxation Office’s (ATO) focus.

The Rising Interest in Electric Vehicles and FBT Implications

In a move to promote environmentally friendly transportation, the government introduced a significant concession in late 2022 concerning electric vehicles (EVs). This initiative allows businesses to provide certain EVs to their employees without incurring the standard 47% FBT on their private usage. To qualify, vehicles must be either electric cars, hydrogen fuel cell electric vehicles, or plug-in hybrid electric vehicles with:

  • A purchase price below the luxury car tax (LCT) threshold for fuel-efficient vehicles, set at $89,332 for the 2023-24 fiscal year.
  • Acquisition and usage commencing on or after July 1, 2022.

Business owners should note the upcoming change: after March 31, 2025, the FBT exemption will cease for plug-in hybrid electric vehicles unless they were under a qualifying arrangement before this date.

Potential Challenges and How to Navigate Them

  • Exclusivity to Employees: The FBT exemption only applies to vehicles provided to employees, meaning that business structures such as sole proprietorships and partnerships, where owners are not considered employees, are not eligible for personal exemption benefits.
  • Luxury Car Exclusion: Vehicles exceeding the luxury car price limit at their initial purchase or used before July 1, 2022, are disqualified from FBT exemption, emphasising the importance of meeting both the price and timing criteria.
  • Exclusion of Home Charging Stations: While the FBT exemption extends to various car-related benefits (e.g., insurance, maintenance), it excludes home charging stations. Installation or reimbursement for these stations by the employer constitutes a separate fringe benefit, requiring careful consideration.

Employers must meticulously report the value of exempt EV benefits, as these figures are included in the employee’s reportable fringe benefits amount and influence various tax outcomes and benefits calculations.

Calculating electricity costs for EVs introduces options for employers: using the ATO’s simplified 4.20 cents per kilometre rate or a bespoke method to assess electricity usage accurately. With subsequent employer reimbursement, direct employee purchase or lease of an EV falls outside the exemption scope, barring specific novated lease configurations.

Additional Considerations for FBT Compliance

  • Mandatory Registration: The provision of any fringe benefits necessitates FBT registration, with the ATO keenly investigating non-registered entities for potential non-compliance.
  • Employee Travel Benefits: The distinction between work-related travel (exempt from FBT) and commuting (subject to FBT) has gained prominence, underscored by recent legal precedents. Businesses must thoroughly evaluate the nature of travel benefits provided to ensure compliance.

By delving into these facets of the Fringe Benefits Tax, business owners can better navigate the regulatory landscape, optimise their tax positions, and leverage concessions, particularly in sustainable transportation with electric vehicles.

If you are a business owner looking to navigate the complex landscape of Fringe Benefits Tax (FBT), contact us for expert guidance and support. Our team has extensive knowledge and experience in FBT regulations and can help you optimise your tax position and leverage concessions. Don’t wait until the last minute to ensure FBT compliance – reach out to us today to learn more.