It’s been a year since the federal government introduced the new legislation that makes eligible electric vehicles (EVs), bought with a novated lease, exempt from fringe benefits tax (FBT). The change has inspired a rise in EV sales, which have skyrocketed since. This is fantastic news for anyone looking to buy an EV. In fact, given the benefits to the environment, and the significant savings you’ll make on the purchase, more and more people may trade their current vehicle in for an EV. So we’ve compiled all the info you need on the benefits of the EV tax exemption, what it means for the environment, and how much a potential EV buyer is likely to save.
New cars on the block
Sales of fully electric vehicles (EVs) have more than tripled in Australia across the first nine months of 2023. Current sales data shows that 65,743 EVs have been registered between January 1 and September 30. This means that sales of EVs are up an incredible 202%.
WhichCar? Reports that the Australian new-car market has crested a million sales so far this year and 71,800 of those are EVs. Among the top EV models are Tesla, BMW, Volvo and Hyundai, although MG and VW sales are starting to pick up rapidly.
Are EV’s really better for the environment?
There have been many studies, and subsequent debates around the eco-friendliness of electric vehicles. A recent, and trusted study done by the University of Technology in Sydney found that electric vehicles do in fact emit, on average, 29-41% fewer emissions than regular fossil-fuelled cars for every kilometre driven. Further studies reveal that EVs are more sustainable when driven over longer distances, which is perfect for Australians, who enjoy exploring the country come holiday season.
Beyond Zero Emissions reports that ‘A shift to EVs for urban travel would eliminate 6% of Australia’s greenhouse gas emissions. 8% if regional car travel is included. This would make a major dent in Australia’s emissions – while delivering a range of benefits to individuals.’
Saving in more ways than one
Apart from saving on fuel costs, electric vehicles will also cost less in the long run because they have lower running costs and fewer mechanical parts. That’s not to mention the tax savings when you purchase an EV with a novated lease.
Before the exemption, salary packaging your vehicle payments meant paying fringe benefit tax as well. Now, the Fringe Benefits Tax (FBT) exemption allows salaried employees to take out a novated lease and pay for their EVs from their pre-tax income without having to pay FBT, which dramatically reduces the cost of the car itself, and levels out the daily running costs. In fact, treasurer Jim Chalmers announced that it could save you up to $4700 a year on a $50,000 EV or 40% off of the cost price.
Inclusions and exclusions
The exemption is only applicable to EVs priced purchased with a novated lease under $84,916 and does not extend to vehicles that are not considered to be a ‘car’ under the current FBT legislation – these are vehicles that are designed to carry one tonne or more, or nine passengers or more.
Buying a car with a novated lease
Instead of buying a car outright, a novated lease allows you to finance your vehicle and pay for it with a combination of your pre-tax and post-tax salary. As you now know, you also don’t need to pay any fringe benefit tax on it either.
A novated lease is also cheaper because you use your pre-tax salary to cover the running costs of your car including everything from the maintenance and fuel and servicing, to your vehicle registration and insurance.
A world of benefits with salary packaging
The fringe benefit tax exemption on electric vehicles purchased with a novated lease speaks volumes about the government’s commitment to sustainability. It’s no surprise that Australians who share that drive towards a more eco-friendly way of living are flocking to buy EV’s. The savings made on the purchase of an EV through salary packaging are just one of the many benefits. Countless Australians are reaping the rewards of salary packaging by paying for their expenses using their pre-tax salaries.
Whether you’re looking to buy an EV with a novated lease or are considering salary packaging your expenses, CBB The Salary Packaging People have helped hardworking people make the most out of every dollar they earn for over 30 years. We’ve made it our mission to ensure that employees can maximise their pre-tax salary, so they can afford the necessities and luxuries of life. Our dedicated team is ready to guide you through our industry-leading salary packaging products and services so that every one of your Salary Packaging needs are not just met, but exceeded.