Electric car FBT bill passes both houses

Tax Insights

On 28 November 2022, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 (the “Bill”) finally passed Houses of Parliament, rendering its enactment a mere formality.

Despite proposed amendments in the House of Representatives that would have included all hybrid electric vehicles and imported second-hand vehicles (i.e., those used in a foreign country and imported into subsequent to 1 July 2022) within the Bill’s scope, the amendments actually made to the Bill as first read related to the implementationDespite proposed amendments in the House of Representatives that would have included all hybrid electric vehicles and imported second-hand vehicles of the post-third-year review referenced in the Explanatory Memorandum (1), and a surprise move against plug-in hybrid electric vehicles effective 1 April 2025, albeit with ‘grandfathering’ relief.

More specifically, the amendments made comprised:

1. Formal review after three years

The first amendment to the Bill provides that a review of the operation of the Fringe Benefits Tax (FBT) exemption over during the first three years from its commencement, in particular its effectiveness in encouraging the uptake of zero or low emissions vehicles, must be completed within 18 months of that three-year period. The first amendment also provides that the content resulting report must be both tabled in Parliament and made publicly available within prescribed timeframes.

2. Application to plug-in hybrid electric vehicles (EV) to cease from 1 April 2025

RSM Australia makes the following observations in relation to the Bill, as amended:

The second amendment to Bill, largely initiated by the Australian Greens, provides that the FBT exemption will cease to apply from plug-in hybrid electric vehicles effective 1 July 2025. The second amendment does, however, provide welcome ‘grandfathering’ relief for arrangements involving plug-in hybrid electric vehicles that were entered into prior to 1 July 2025.


Key Observations

RSM Australia makes the following observations in relation to the Bill, as amended:

  • No amendments were made to the Bill that would exclude zero or low emissions vehicles in relation to employees’ Reportable Fringe Benefits Amount (RFBA), meaning that the value of the (exempt) fringe benefit received will be added to employees’ RFBAs. We understand this will be the first FBT exemption that counts towards an employee’s RFBA, and may run counter to the overall legislative intent of the Bill;
  • As foreshadowed in our July 2022 article on the Bill, clients should be aware that:
    • The Bill applies only to ‘car benefits’ and not ‘property benefits’, meaning simply ‘gifting’ an eligible vehicle to an employee will not attract the FBT exemption; and
    • The FBT exemption is limited to eligible vehicles, the value of which falls within the Luxury Car Tax threshold for fuel-efficient cars, which is currently $84,916 (including GST, and all additions/modifications).
  • There remains uncertainty around the FBT treatment of associated equipment. However, per the recent media release by the Australian Greens:

The ATO will also issue guidance on when household charging technology is able to be included within FBT-exempt vehicles packagesApplication to plug-in hybrid electric vehicles (EV) to cease from 1 April 2025”.

 

Have a FBT question about EVs?

If you would like to discuss how the Bill, once enacted, will impact you or your business, please contact Rick Kimberley (Australian Global Employer Services Leader) at [email protected] or on (03) 9286 8135.

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