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An electric vehicle (EV) is a type of vehicle that runs on electricity instead of gasoline or diesel fuel. The electric power is stored in a battery and supplied to an electric motor, which propels the vehicle. EVs can be charged from a charging station or from a standard electrical outlet, and produce no tailpipe emissions, making them a more environmentally friendly transportation option.
The Federal Government in Australia has passed legislation for a Fringe Benefit Tax (FBT) exemption on electric vehicles (EVs). The EV discount applies to fringe benefits provided on or after 1 July 2022 for eligible zero or low emission vehicles that are held and used on or after 1 July 2022.
It includes an exemption to the requirement to pay fringe benefits tax (FBT) on zero or low-emission vehicles that fall below the luxury car tax threshold of $89,332 (2023-24). These include battery electric vehicles and hydrogen fuel cell electric vehicles. Plug-in hybrid electric vehicles are also eligible up until 1 April 2025. The FBT exemption only applies to EVs used by businesses or financed under a novated lease.
This legislation is aimed at encouraging the uptake of EVs and encouraging car manufacturers to import more affordable electric models to Australia. Estimates suggest that there could be savings of between $4,000 and $10,000 in income tax each year for individuals who opt for EVs under a novated lease.
The introduction of the Electric Car Discount means that individuals will be exempt from paying FBT on zero or low emission vehicles below the luxury car tax threshold.
A zero or low emissions vehicle includes:
- A battery electric vehicle (BEV)
- A hydrogen fuel cell electric vehicle
- A plug-in hybrid electric vehicle (PHEV)
To be eligible for the FBT Exemption, the car must also meet the below criteria:
- Below the luxury car tax threshold (LCT) which is $89,332 for the 2023/24 financial year
- First held for use from 1st July 2022 onwards (so it applies retrospectively)
- Additionally, the exemption applies to plug-in hybrid electric vehicles (PHEVs) up until 1 April 2025. From that date, those on pre-existing leases are still entitled to the FBT exemption up until the end of their lease, so long as a commitment is made before 1 April 2025.
A novated lease is one of the most cost effective ways of purchasing and running a new car. That’s because the lease repayments and vehicle running costs can be included as part of your salary package and paid for using pre-tax salary. Using pre-tax salary to pay for your vehicle expenses reduces your taxable income and ultimately means that you pay less tax every year!
Under a novated lease, the employer typically passes the Fringe Benefits Tax (FBT) liability onto the employee. However, with the new legislation, employers will no longer be required to pay FBT on eligible EVs provided under a novated lease. This means that employees who choose to salary sacrifice for an EV under a novated lease may be able to save money on their taxable income compared to other avenues for purchasing an EV.
In addition to the potential tax savings, novated leasing for EVs can also provide other benefits for both employees and employers. For employees, it can make it easier to afford an EV by allowing them to spread the cost of the vehicle over a longer period of time. For employers, it can help to attract and retain talent by offering a competitive salary sacrifice benefit.
Overall, novated leasing is an attractive option for individuals and businesses looking to transition to EVs, and the new FBT exemption is expected to further increase the popularity of this type of arrangement in Australia.
The Federal Government in Australia has passed legislation for a Fringe Benefit Tax (FBT) exemption on electric vehicles (EVs). The EV discount applies to fringe benefits provided on or after 1 July 2022 for eligible zero or low emission vehicles that are held and used on or after 1 July 2022.
What does it include?
It includes an exemption to the requirement to pay fringe benefits tax (FBT) on zero or low-emission vehicles that fall below the luxury car tax threshold of $84,916. These include battery electric vehicles and hydrogen fuel cell electric vehicles. Plug-in hybrid electric vehicles are also eligible up until 1 April 2025. The introduction of the Electric Car Discount means you can finance an EV (under a novated lease) and pay for all the associated costs (rego, insurance, etc) using pre-tax dollars.
The FBT exemption only applies to EVs used by businesses or financed under a novated lease.
This legislation is aimed at encouraging the uptake of EVs and encouraging car manufacturers to import more affordable electric models to Australia. Estimates suggest that there could be savings of between $4,000 and $10,000 in income tax each year for individuals who opt for EVs under a novated lease.
What types of vehicles are eligible for the exemption?
The introduction of the Electric Car Discount means that individuals will be exempt from paying FBT on zero or low emission vehicles below the luxury car tax threshold.
A zero or low emissions vehicle includes:
- A battery electric vehicle
- A hydrogen fuel cell electric vehicle
- A plug-in hybrid electric vehicle
To be eligible for the FBT Exemption, the car must also meet the below criteria:
- Below the luxury car tax threshold (LCT) which is $84,916 for the 2022/23 financial year
- First held for use from 1st July 2022 onwards (so it applies retrospectively)
- Additionally, the exemption applies to plug-in hybrid electric vehicles (PHEVs) up until 1 April 2025. From that date, those on pre-existing leases are still entitled to the FBT exemption up until the end of their lease, so long as a commitment is made before 1 April 2025.
Zero or low-emission vehicles that fall below the luxury car tax threshold of $89,332 are now exempt from FBT. Estimates suggest that there could be savings of between $4,000 and $10,000 in income tax each year for individuals who opt for an EV under a novated lease.
EVs produce no exhaust emissions, unlike petrol and diesel cars which emit harmful pollutants such as carbon monoxide, nitrogen oxides, and particulate matter. This means EVs generate lower net emissions which greatly benefits the planet. The EV batteries can also be used after their EV life by being recycled, ensuring electric vehicles have a low impact to the environment.
Charging an electric car is less expensive than refuelling a petrol car. EVs have fewer moving parts and no need for oil changes or exhaust system repairs, significantly reducing the overall maintenance costs. Due to the rapid increase and evolution of technology, the up-front costs for EVs will also decrease in order to make EVs more affordable and compete with competition.
You can charge your electric car at home using a regular electrical outlet or a dedicated home charging station, perfect for overnight top-ups. You can also charge an EV at public charging stations when on the go, which are located in most public places such as shopping centres, parking lots, and rest areas. These provide a much faster charging speed. See below for a complete EV charging map of Australia!
The absence of engine noise in an EV provides a much quieter driving experience, which can result in a more relaxed and enjoyable ride. Additionally, the absence of engine noise also means that EVs are less likely to disturb the peace in residential areas and can lead to a reduction in noise pollution.
At Simplygreen Evolve we will help get you into an EV in no-time, saving you time and thousands of dollars.
Complete the online contact form below and one of our EV Leasing Specialists will contact you within 24 hours.
Simplygreen Evolve offers novated leases on Battery Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV), saving you money and reducing your environmental impact. Choose an electric vehicle and take advantage of lower running costs, government incentives, and reduced carbon footprint.
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In addition to the state-wide Electric Car Discount, there are various incentives you might not be aware of. Dive into our state-by-state guide, showcasing exclusive incentives and rebates available across the states of Australia.
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