Electric Vehicles (EVs) have become increasingly popular, with the FBT exemption making them particularly attractive under salary packaging arrangements. The Federal Government has now introduced legislation to wind back the full exemption, with the proposed changes currently before Parliament.
What is proposed to change?
Subject to the legislation being enacted, the existing exemption will continue until 31 March 2027.
For new arrangements from 1 April 2027 to 31 March 2029:
- EVs valued at $75,000 or less will retain the full FBT discount
- EVs above $75,000 but below the applicable fuel-efficient luxury car tax threshold will generally receive a 25% discount on FBT payable
From 1 April 2029, eligible EVs under new arrangements will generally receive a 25% FBT discount.
What about existing arrangements?
The proposed transitional rules are intended to preserve the existing exemption for eligible EVs provided under a financially binding commitment entered into before 1 April 2027, while that commitment remains in place.
Employers and employees alike should exercise caution when existing arrangements are renewed or varied, e.g. refinancing a lease or changing employers, as changes may affect access to the transitional treatment.
What should businesses do?
While the legislation remains before Parliament, employers should start identifying existing EV arrangements and the dates of relevant binding commitments. Employers considering new or varied arrangements should also understand how the proposed rules may affect their FBT position.
For employees considering an EV, timing and vehicle value will become increasingly important when the legislation is eventually enacted.
