The Federal Government this week placed its electric vehicle (EVs) incentives bill before the Australian Parliament. This could be a game changer yet for business owners having to juggle car fringe benefits tax.

Treasury laws amendment (Electrical Car Discount) bill 2022

The legislation exempts low-emissions cars from fringe benefits tax (FBT)

To qualify, the low-emissions vehicle must have a retail price below the current relevant luxury car tax threshold of $84,916 (for 2022/23 Financial Year), and have been first made available for use on or after 1 July 2022.

The Government claims an employer offering a circa $50,000 EV to an employee as a fringe benefit could save up to $9,000 a year.

It also claims that individuals using a salary sacrifice arrangement to pay for the same model could save up to $4,700 a year.

Interestingly, car benefits that are exempt from FBT under this exemption will continue to be included in an employee’s individual fringe benefits amounts for the purpose of determining the employee’s reportable fringe benefits amount (RFBA). This is achieved by proposing to amend section 135P of the FBTAA. This is the first time a specific measure has been introduced to treat an exempt benefit as still being a reportable fringe benefit. Presumably, this is aimed at preventing ZEVs from being used to reduce income-tested benefits and payments.