News
As the world continues to prioritise reducing carbon emissions, the demand for electric cars is on the rise. In Australia, the government has been encouraging the purchase of electric vehicles (EVs) by providing tax incentives to both individuals and businesses. The key example here is that from July 1 2022, employers don’t pay Fringe Benefits Tax (FBT) on eligible electric cars and associated expenses!
Here we’ll break down the incentive a little more, discuss eligibility and look at why you should seriously consider an EV for your business vehicle needs …
The FBT is a tax that employers pay on certain benefits they provide to their employees in addition to their salary or wages. These benefits are referred to as fringe benefits and can include things like company cars, health insurance, and expense accounts. However, electric cars and associated expenses are exempt from FBT under certain conditions and that’s why we’re here…
Eligibility:
To be eligible for the FBT exemption, the electric car must be classified as a “low emissions vehicle” and meet specific criteria set by the Australian Taxation Office (ATO). The car must have zero or very low carbon dioxide emissions and must be capable of being driven solely by an electric motor. Additionally, the electric car must not be designed for off-road use and must not have a carrying capacity of more than one tonne (which may rule your business out).
In addition to the FBT exemption on eligible electric cars, employers can also claim deductions for associated expenses such as electricity used to recharge the car, repairs and maintenance, and even car parking costs.These deductions can be substantial and can help offset the initial cost of purchasing an electric car.
Despite the potential cost savings, to date, many employers are not taking advantage of these exemptions and deductions. According to a recent survey by the Electric Vehicle Council, surprisingly, only 12% ofAustralian businesses currently offer electric cars as part of their company fleet. This is despite the fact that electric cars can be cheaper to run and maintain than traditional petrol or diesel cars.
Well, it would have to first fit your business needs, then fit into the eligibility criteria to make it completely worthwhile, but one of the main reasons for the low uptake of electric cars by businesses so far is the perception that they are too expensive. And, while electric cars can have a higher upfront cost than petrol or diesel cars, the FBT exemption and associated expense deductions can significantly reduce the overall cost of ownership. Additionally, electric cars can generally have lower fuel and maintenance costs, which can further reduce costs over time.
Another reason why employers may not be taking advantage of the FBT exemption is a lack of understanding of the eligibility criteria and the claiming process. We can help here, so if you’re considering a new vehicle for your business, speak with the Attune team so we can show you the options that fit your situation best (including incentives available).
By not taking advantage of the FBT exemption on eligible electric cars and associated expenses, employers may be missing out on significant cost savings. Additionally, encouraging the use of electric cars can help businesses reduce their carbon footprint and contribute to the fight against climate change. That sounds like a couple of big wins to us!
The FBT exemption on eligible electric cars and associated expenses is a valuable tax incentive that employers should take advantage of. So if you’re in the market and would like to discuss how an EV might work for your business (from a taxation perspective), call the Attune team on 1300 866 113 or send us an email to start the conversation.
