The Government announced a proposal to cut the tariffs and remove fringe benefits tax (FBT) on electric cars from 1 July 2022. If enacted, this will apply to the FBT year that ends on 31 March 2023. Vehicles eligible for FBT exemption are defined as zero or low emission vehicles. These cars are specifically, either:

• Battery electric vehicle:
  • Uses only an electric motor for propulsion
  • Is not fitted with a fuel cell or an internal combustion engine.
• A hydrogen fuel cell electric vehicle:
  • Uses an electric motor for propulsion
  • Is fitted with a fuel cell for converting hydrogen to electricity
  • Is not fitted with an internal combustion engine.
• A plug-in hybrid electric vehicle:
  • Uses an electric motor for propulsion
  • Takes and stores energy from an external source of electricity
  • Is fitted with an internal combustion engine for the generation of electrical energy and/or propulsion of the car – this will only qualify for the exemption if it can be recharged by an off-vehicle power source.

Additionally, there are three other conditions to be met to qualify for the exemption:

• The value of the vehicle at the first retail sale must be below the luxury car tax threshold for fuel efficient cars($84,916 in 2022-23);
• The vehicle must be held and ready for use on or after 1 July 2022;
• The benefit is provided to a current employee.

These amendments will be reviewed after three years to assess electric car uptake.

It will be interesting to see the outcome of this initiative as far as zero or low emission vehicles are concerned.

If you are interested in learning more about fringe benefits tax, please contact our office on 1300 620 345.