There has been a new Bill proposed in Parliament – one made in a bid to incentivise electric car purchases by removing fringe benefits tax (FBT).
This proposed FBT exemption will reduce costs for a few thousand owners each year. The first year cost is around $20 million, reaching $90 million by 2025/2026.
The removal of FBT from electric, plug-in hybrid and hydrogen cars that are supplied by employers to staff, if the vehicle price is below the luxury car tax threshold (which is $84,916 for the financial year 2022-2023), would benefit business financially.
It could save an employer $9,000 for an EV costing $50,000, or $4,700 where the arrangement includes salary sacrificing.
If enacted, the Bill will apply to all eligible vehicles first held and used on or after 1 July 2022.
There is confidence that this move will lower the barrier to the uptake of EVs in Australia. It will encourage more affordable vehicles into the market, which is a welcome relief in the face of the rising cost of fuel.
There are some implications of this proposed Bill that have been observed.
For example, gifting an EV to an employee will not allow for FBT exemptions as technically this would make it a ‘property benefit’ and not a ‘car benefit’.
Some concern has been expressed regarding reportable fringe benefit amounts (RFBAs) and how providing use of an eligible EV will still be included in determining this amount.
However, this should not be too much of a deterrent for those willing to benefit from the proposed scheme, as the approach does seem equitable when considering RFBAs are used to determine various other entitlements.
There is also the issue of the lack of supply, which is a critical factor that is stagnating the uptake in Australia. This contributes to inflated prices and although we may eventually reach a second-hand market, data is thin on the resale value of EVs.
The threshold which is just shy of $85,000 does encompass several brands available in the Australian market today, however does not accommodate the cost of additional features and modifications that some businesses may wish to purchase.
If you like to understand the benefits of this proposed measure to you and your business, the team at Glance Consultants are happy to assist. Call us now on 03 98859793 or email us at enquiries@glanceconsultants.
