How to save FBT costs with your next Electric Vehicle

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Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) help you avoid having to pay Fringe Benefits Tax (FBT) through the current exemption. This tax benefit, which includes both car fringe benefits and expense payment fringe benefits, makes low emissions vehicles substantially more affordable for current employees and their family members, whether through direct purchase or lease agreements.

A novated lease arrangement optimises these financial benefits by enabling pre-tax salary packaging for eligible electric cars. When combined with reduced running costs and electricity costs from home charging stations, the savings are substantial. The FBT exemption threshold applies to both battery electric and hydrogen fuel cell Electric Vehicles, ensuring zero or low emissions options are more accessible than traditional internal combustion engine vehicles.

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What the Electric Vehicle discount means for you

Battery Electric Vehicles now offer substantial tax advantages through the Fringe Benefits Tax exemption, particularly for eligible electric cars under the luxury car tax threshold of $91,387. Current employees using novated lease agreements can significantly reduce their reportable fringe benefits amount, making low emissions vehicles more financially accessible.

The transition to electric cars delivers measurable cost reductions beyond tax benefits. Running costs and electricity costs can present notable savings – NSW commuters switching from internal combustion engine vehicles to Battery Electric Vehicles can reduce expenses by approximately $30 weekly. Home charging stations and reduced maintenance requirements further decrease the overall cost of ownership compared to traditional fuel-efficient vehicles.

Combining your car fringe benefits exemption with a novated lease arrangement maximises these financial advantages. This approach allows for pre-tax salary packaging while benefiting from both the FBT exemption threshold and lower operational costs. Private use of Plug-in Hybrid Electric Vehicles or hydrogen fuel cell Electric Vehicles may also qualify for these tax benefits, providing flexible options for environmentally conscious drivers.

How the EV discount creates more affordable options

Most salary package and company Electric Vehicles enter the used car market after 3-4 years of service, typically with low mileage and remaining warranty coverage. Thanks to the current electric car discount, more businesses are adding Battery Electric Vehicles and Plug-in Hybrid Electric Vehicles to their fleets, which will significantly expand the pre-owned EV market.

This growing pool of second-hand electric cars brings good news for cost-conscious buyers. These vehicles often come with existing warranty protection and deliver substantial savings through reduced running costs and lower electricity costs compared to traditional internal combustion engine vehicles. The expanding market of low emissions vehicles gives more Australians a practical path to sustainable driving.

The transition to Electric Vehicles becomes more achievable as these ex-fleet cars enter the market at lower price points. Whether choosing a battery electric or plug-in hybrid option, buyers benefit from both reduced purchase costs and ongoing savings in fuel and maintenance, while supporting environmentally-conscious transportation.

How to qualify for Electric Vehicles FBT exemption

The electric car Fringe Benefit Tax (FBT) exemption applies specifically to novated lease agreements for current employees and their family members. While cash purchases and traditional car loans don’t qualify as exempt benefits, a novated lease arrangement unlocks significant savings through both car fringe benefits and expense payment fringe benefits for your Electric Vehicle purchase.

Your lease agreement becomes effective when your employer manages payments through their payroll system, affecting your reportable fringe benefits amount. Most employers support these arrangements since they carry minimal risk while helping employees access Battery Electric Vehicles and Plug-in Hybrid Electric Vehicles. The process mainly involves establishing the correct taxable value and ensuring compliance with FBT exemption thresholds.

Your total savings include running costs, electricity costs, and home charging station expenses. When lease payments come from pre-tax salary, it reduces both employee and employer tax obligations. This makes novated leases particularly attractive for zero or low emissions vehicles, especially when combined with reduced operational expenses.

TMS Financials provides you with a team of experienced professionals that help you achieve your financial goals through smart tax structures and strategic financial structuring. We’re a one-stop shop for all financial needs and pride ourselves on building strong partnerships with our clients.

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This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.