Electric Car Discount Bill passed to exempt EV from FBT
As the calendar year comes to an end, we get closer to the FBT year-end. This year we have seen two key changes that employers need to be aware of as they may impact their FBT Returns.
Electric Vehicles and FBT
On 25 November 2022, the Australian Government passed the Treasury Laws Amendment (Electric Car Discount) Bill 2022, which provides a fringe benefits tax (FBT) exemption for low and zero-emission cars from 1 July 2022.
The exemption will only apply to the following cars:
- battery electric vehicles –which use only an electric motor and are not fitted with either a fuel cell or an internal combustion engine
- hydrogen fuel cell electric vehicles – vehicles charged by a fuel cell
- plug-in hybrid electric vehicles – a motor vehicle that uses an electric motor that can be plugged in and charged with electricity but also contain an internal combustion engine.
Key points to note in relation to this exemption are:
- the exemption only applies to current employees
- the exemption is only available to cars valued below the luxury car tax threshold. For fuel-efficient vehicles the threshold for the 2022-23 financial year is $84,916
- unlike other exemptions, the value of the exempt car benefit will be included in an employee’s reportable fringe benefits amount
- this exemption will be reviewed after three years to assess electric car uptake.
This exemption is available even if the vehicle is salary packaged. This is, therefore, a great opportunity for employees to salary package these cars, which can result in significant savings for them. It is estimated that the annual tax savings on a $74,000 electric car is $14,400.
FBT Record keeping changes
Proposed changes1 have been released to give the Commissioner powers to modify, existing FBT record-keeping obligations, which will allow employers to rely on existing corporate records, instead of existing employee declarations and other prescribed records.
The purpose of the change is to reduce compliance costs for employers when finalising their FBT returns by providing them with an option to rely on existing or other alternative records that they may hold. However, where an employer wants to continue with the current practice, they may continue to obtain employee declarations.
Treasury has also released two draft legislative instruments that provide guidance on what alternative records may be acceptable with respect to travel diaries and the relocation transport declaration. These are summarised below:
|Travel diaries to apply the otherwise deductible rule||Relocation transport provided to relocating employees|
|– be in English and contain the name of the employee receiving the benefit; |
– note the duration of travel;
– for each activity undertaken by the employee in the course of producing their assessable income while undertaking the travel, the:
– place where the activity was undertaken;
– date and approximate time the activity commenced;
– duration of the activity; and
– nature of the activity.
|– name of employee or associate of the employee receiving the benefit;|
– number of family members travelling in the car;
– make and model of the car driven;
– address of the departure and arrival locations;
– date(s) of travel;
– total number of whole kilometres travelled between the address of departure and the address of arrival.
There is no limit on the number of records that may, in aggregate, meet the information requirements, and information can come from multiple sources. So, in practice if the employee’s calendar includes sufficient details, it may be the only record that employers need to maintain.
If the bill receives Royal Assent by 31 March 2023, it is expected that the measures will be first effective from the FBT year commencing 1 April 2023.
If you have any questions in relation to this FBT exemption, please contact your usual SW advisor.
Rahul Sanghani, Senior Manager
Ophelia Katrivessis, Senior Consultant
1 The Treasury Laws Amendment (2022 Measures No 4) Bill 2022