The FBT electric vehicle exemption explained

What the exemption is

The FBT electric vehicle exemption provides relief from Fringe Benefits Tax (FBT) for eligible vehicles made available to employees. This exemption applies when specific conditions are satisfied.

Eligible vehicles for the exemption include battery electric vehicles, hydrogen fuel cell electric vehicles, and plug-in hybrid electric vehicles. The availability of the exemption for plug-in hybrid electric vehicles is time-limited. FBT calculator can assist with calculations.

While the exemption removes FBT obligations relating to the car benefit, it is important to recognise that the benefit may still need to be reported.

The eligibility conditions

To be eligible for the fringe benefits tax (FBT) electric vehicle exemption, a car must meet specific criteria. The vehicle’s design must be that of a car capable of carrying a load of less than one tonne and accommodating fewer than nine passengers.

Another condition for eligibility is the date the car is first held and used. This must be on or after 1 July 2022. Furthermore, the value of the car at the time of its first retail sale must be below the luxury car tax threshold applicable to fuel-efficient vehicles.

It is important to recognise that eligibility for plug-in hybrid vehicles ceased from 1 April 2025. However, transitional rules apply to existing arrangements.

Reporting still applies

Even if a car benefit is exempt from Fringe Benefits Tax (FBT), the vehicle’s value is still included when determining an employee’s reportable fringe benefits amount. This inclusion impacts the calculation of an employee’s income-tested obligations and entitlements.

The reportable fringe benefits amount is a figure included on an employee’s annual payment summary. It is used to assess the employee’s overall taxable income.

To ensure compliance, employers must maintain records that substantiate the eligibility of the vehicle for the FBT exemption.

• Records should demonstrate eligibility.

Working out the numbers

Calculating the impact of the electric vehicle exemption requires careful consideration. If a vehicle does not meet the criteria for exemption, the taxable value of the car benefit must be determined. Employers can use the FBT calculator to model this value, which will inform their FBT obligations.

To ensure compliance, employers must regularly verify the current luxury car tax threshold applicable to fuel-efficient vehicles. This threshold is subject to change and the most up-to-date information is available from the ATO. Relying on outdated information could result in incorrect FBT calculations.

The FBT year operates on a specific timeframe, running from 1 April to 31 March. The FBT return itself is due by 21 May following the end of the FBT year.