FBT exemption for EVs at a glance

The FBT exemption for electric vehicles (EVs) can provide significant savings to employers and employees under salary packaging arrangements. There are a few tricky areas to be aware of:

• A home charger is a separate benefit and not covered by the exemption for private use of an EV.

• The ATO has set a home charging rate of 4.2c/km but this can only be used in connection with battery electric or hydrogen fuel cell cars, and only for at-home charging, not commercial charging stations, so it’s necessary to be able to determine the proportion of total charging occurring at home to use this rate.

• The cost of replacing a car battery when this is required as a repair is considered a car expense so doesn’t incur FBT. But a battery upgrade would be an improvement and need to be reflected in the cost of the car.

• One of the threshold tests for exemption is that luxury car tax has never been paid. For second hand cars, this means it’s necessary to investigate the original cost of the car to determine whether the car qualifies as exempt.

• PHEVs must be provided under a pre-existing commitment which is not disturbed to continue to be exempt from 1 April 2025. Changes in commitment can arise from a lease extension, suspension of salary packaging, the addition of accessories or a change in employer.

• It appears to be the ATO’s view that a car owned by an employer can never give rise to a pre-existing commitment, so employer-owned PHEVs held prior to 1 April 2025 are unlikely to be exempt thereafter.

• The ATO also considers that pooled cars are not provided under pre-existing commitments as there is no arrangement to provide the car to a single, designated employee.

See our at a glance flowchart below.