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Proposed Fringe Benefits Tax exemption for low or zero emission cars
Technical article

Proposed Fringe Benefits Tax exemption for low or zero emission cars

The Government has introduced a Bill to provide an exemption from Fringe Benefits Tax (“FBT”) for a car fringe benefit attributable to an eligible low or zero emission car. The exemption is intended to encourage a greater take up of fuel-efficient cars and reduce Australia’s carbon emissions.

Which cars will the exemption apply to?

To be eligible for the FBT exemption three requirements must be satisfied.

First, it must be a vehicle (other than a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers. This will therefore exclude any utility vehicles with carrying capacity over 1 tonne (i.e. residual vehicles within the meaning of FBT legislation).

Second, the value of the car at the time of its first retail sale must not exceed the luxury car tax threshold for fuel efficient vehicles (currently $84,916).

Third, the car must be a “zero or low emission car”. That term is defined to include a battery electric vehicle, a hydrogen fuel cell electric vehicle or plug-in hybrid electric vehicle. Thus, a car that has an internal combustion engine will qualify provided it is able to be re-charged by an off-vehicle power source.

The Explanatory Memorandum accompanying the Bill makes clear that the FBT exemption may be available when an eligible car is held by a subsequent owner (i.e., purchased second hand) provided the first owner purchased the car on or after 1 July 2022.

Is the FBT exemption available for salary packaging arrangements?

Yes, the FBT exemption will be available for eligible electric cars provided to employees under salary packaging arrangements, as long as all the relevant conditions for the FBT exemption are satisfied.

Is the provision of an eligible car a reportable fringe benefit?

Yes, the car benefit will be a Reportable Fringe Benefit and thus taken into account in determining eligibility for certain tax offsets and means tested benefits and liability for certain Government charges.

Is the exemption permanent?

The Explanatory Memorandum accompanying the Bill states that the government will review the concession in three years to determine whether the FBT concession should continue or some other concession introduced to encourage the take up of zero or low emission cars.

When do the changes apply from?

The exemption will apply to eligible cars that are both first held and first used the car on or after 1 July 2022. Thus, the exemption would apply to an eligible car ordered prior to 1 July 2022 but not delivered until on or after that date.

What are the next steps?

Clients wishing more information should contact their Pitcher Partners representative to determine what action is required in light of the changes.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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