The Australian Government has introduced a significant incentive for small businesses to go green by offering FBT exemptions for electric cars starting from 1 July 2022. This move not only supports environmental sustainability but also offers financial advantages for businesses ready to embrace electric vehicles (EVs). Here’s a streamlined overview to help small business owners understand and benefit from this exemption

Eligibility for EVs FBT Exemption

For an electric car to qualify for the FBT exemption, it must meet the following criteria:

1. Be a Zero or Low Emissions Vehicle

Including battery electric, hydrogen fuel cell, and plug-in hybrid electric vehicles (note: plug-in hybrids will be excluded from 1 April 2025, with specific exceptions).

2. First Held and Used After 1 July 2022

The car must be provided for private use to an employee or their associates for the first time on or after this date.

3. Not Subject to Luxury Car Tax (LCT)

At the time of its importation or sale, the car should not have been liable for LCT.

Note: For the purposes of the Fringe Benefits Tax (FBT), motorcycles and scooters are not classified as cars and thus, are ineligible for the exemption, even if they are electric.

Covered Car Expenses

The exemption extends to several associated car expenses, making the provision of electric cars more economically feasible:

• Registration and Insurance: Essential paperwork and protection for your electric cars are covered.
• Repairs or Maintenance: Keeping the vehicle in top condition is also exempt from FBT.
• Fuel Costs: This includes electricity for charging the EV, ensuring that running costs are minimised.

Note: A home charging station does not qualify as a car-related expense for the purposes of electric car fringe benefits. Nonetheless, it could be considered either a property fringe benefit or an expense payment fringe benefit.

Reporting Requirements

While the private use of eligible electric cars is exempt from FBT, employers are still required to account for the value of such benefits when determining an employee’s reportable fringe benefits amount (RFBA). This involves calculating the notional taxable value of benefits linked to the private use of the exempt electric car.

Advantages of Transitioning to Electric Vehicles

Switching to electric vehicles offers several benefits beyond tax exemptions:

• Cost Savings: Reduced operational costs thanks to exemptions on FBT and associated car expenses.
• Environmental Impact: Contributing to a greener planet by reducing carbon emissions.
• Company Image: Enhancing your business’ reputation as a forward-thinking, environmentally responsible entity.

Navigating the Change

To make the most of this opportunity, small businesses should:

• Review Fleet Management Strategies: Consider how integrating EVs can benefit your operations and environmental goals.
• Stay Informed: Keep up to date with potential changes or updates to the FBT exemption rules, especially the upcoming review in mid-2027.

The FBT exemption for electric cars offers small businesses a valuable opportunity to reduce operational costs and enhance their environmental and social responsibility profiles. By understanding the eligibility requirements and associated benefits, businesses can make informed decisions to integrate electric vehicles into their operations. This initiative not only supports the move towards sustainability but also positions businesses as leaders in adopting green technology.