Throughout the world, there has been a substantial increase in the purchase of EVs with Australia lagging significantly. The major contributor to this is the high upfront costs that are discouraging consumers from buying electric vehicles. This draft legislation comes as part of the Government’s pre-election promise to help put 3.8 million EVs on the road by 2030[1], it does this by removing a major cost in the EV purchase process – the Fringe Benefits Tax.

What is FBT and why this incentive?

Simply put when an Employer gives their Employee a benefit – such as a work car for personal use, or the ability to take out a Novated Lease as part of their Total Remuneration Package (Salary) - then the ATO imposes a Fringe Benefits Tax on the employer. The ability to forego this cost means a greater ability for businesses to integrate Electric Vehicles as part of their fleet and capitalise on lower servicing and maintenance costs. A lot of the time the FBT of the employer is passed on to employees who lease their car through work – this legislation would not require employees to pay FBT, potentially putting thousands back into the employee’s pockets.

Based on this draft legislation, eligible employees will be able to benefit from tax-free salary packaging of the purchase and maintenance of an Electric Novated Lease. This is all without any impact on other salary packaging arrangements.

What are the rules

This exemption will apply to vehicles that fit the following criteria:

· Must be considered a Zero or Low Emissions Vehicle, this includes:

- Battery Electric Vehicles (BEVs)

- Hydrogen Fuel Cell Electric Vehicles

- Plug-In Hybrid Electric Vehicles (PHEVs) - only qualify if it can be recharged by off-vehicle power source

· Must be considered a Car – Not applicable to vehicles designed to carry one tonne or more, or nine passengers or more

· Second-hand cars are eligible if the first retail sale occurred after 1 July 2022.

· The purchase price must be below the luxury car tax threshold for EVs ($84,916 in 2022/23)

· This exemption applies from 1 July 2022, but only to cars first sale and delivered on 1 July 2022 or later. If you purchased a car before 1 July 2022 but it is delivered after 1 July 2022, this is eligible.

Conclusion

Eziway is excited to promote this greener leasing alternative and is supporting employer efforts to help charging infrastructure domestically and commercially. Alongside the price of the car, most consumers are concerned about how their home electrical system will cater to their recharging needs. Eziway has partnered with GET Electric, who specialises in providing in-home and at-office car charging stations to meet these concerns. We would like to see this type of continued investment by the Federal Government in supporting Charging Infrastructure nationally to further encourage EV sales. 

This draft legislation is the first step in a long process of promoting electric-powered vehicles - with the passing of the bill yet to occur. More amendments to this legislation may be made to offer more incentives, especially to early adopters of the ‘EV revolution’, with a promised Government Import Tariff exemption on these vehicles expected to come.

We endeavour to make further updates on these exemptions, legislations, and incentives readily available to all our clients. If you’d like to know more about this topic, find in our footnote links to our references. For further information on how this relates to a Novated Lease arrangement, contact our friendly Novated Lease consultants on 1800 932 394 or carleasing@eziway.net.au

[1] The Economic Impact of the ALP’s Powering Australia Plan, RepuTex Energy, December 2021