It’s good news if you’re planning on leasing an electric vehicle. To support the budget and the environment, the federal government has recently introduced legislation that makes electric vehicles (EVs) priced under $84,916 exempt from fringe benefits tax (FBT).
If you’re considering a novated lease, a new Electric or Low Emission Vehicle is an even smarter investment.
Electric vehicles will already save you a considerable amount on fuel and have lower overall running costs because of fewer mechanical moving parts. Add the Fringe Benefits Tax (FBT) exemption and you can potentially save around 40% off the cost price.
What it means is that in comparison to a vehicle with an Internal Combustion Engine (ICE), when you salary package a Low Emission vehicle through a Novated Lease, there is no FBT.
Vehicles that are exempt from FBT
The Government have limited the exemption to the following vehicle types:
● Battery Electric Vehicles (e.g. Tesla models, Nissan Leaf, MG ZS EV)
● Hydrogen Fuel Cell Electric Vehicles (New models from Toyota & Hyundai are coming in 2023)
● Plug-in Hybrid Electric Vehicles (PHEV) (e.g. Mitsubishi Outlander PHEV, Hyundai Ioniq PHEV, KIA Niro PHEV)
When does it start?
The legislation will apply retrospectively to vehicles first held and used by a person on or after 1 July 2022.
Even though the vehicle will be exempt from FBT, there will be a Reportable Fringe Benefit Amount (RFBA) on your Income Statement when it is issued at the end of the Financial Year. This may have an impact if you are claiming Government Benefits or paying a HECS/HELP debt.
A Novated Lease on an eligible vehicle can include all of the running costs for the vehicle, including Service & Maintenance, Tyre Replacement, Registration Renewal, Comprehensive Insurance and even recharging costs (Electricity).
With all things considered, a Novated Lease on a new Electric or Low Emission vehicle could save you thousands and make it so much more affordable. With regard to PHEV models, one of the amendments is that these vehicles will cease to be exempt from FBT after 1 April 2025, although any existing exemption on these vehicles will continue until the end of the arrangement, i.e. end of the Novated Lease period.
What does the exemption NOT include?
The exemption does not extend to vehicles that are not considered to be a ‘car’ under the current FBT legislation, i.e. vehicles designed to carry greater than one tonne or more, or nine passengers or more.
The exemption does not include Hybrid vehicles such as Camry, Corolla, RAV4, etc.
Ready to save on your electric vehicle?
We help employers arrange novated leases as a cost-free employment incentive that helps to attract, reward and retain staff. Contact us if you’d like to know more or call 03 5229 4200.