FBT-free Electric Cars

Clarke McEwan Accountants

FBT-free Electric Cars


New legislation before Parliament, if enacted, will make zero or low emission vehicles FBT-free.  We explore who can access the concession and how.


Electric vehicles (EV) represent just under 2% of the new car market in Australia but it is a rapidly growing sector with a 62.3% jump in new EV registrations between 2020 and 2021.


Making EVs FBT-free is just the first step in the Government’s plan to make zero and low emission vehicles the car of choice for Australians, focussing on affordability and overcoming “range anxiety” by:


  • Cutting import tariffs
  • Placing EV fast chargers once every 150 kilometres on the nation’s highways
  • Creating a national Hydrogen Highways refuelling network, to deliver stations on Australia's busiest freight routes
  • Converting the Commonwealth fleet to 75% no-emissions vehicles


It is on this last point, fleet cars, that the FBT exemption on EVs is targeted. In Australia, business account for around 40% of light vehicle sales according to a research report by Griffith and Monash Universities. However, EV sales to business fleets comprised a mere 0.08% of the market in 2020. The Government can control what it purchases and has committed to converting its fleet to no-emission vehicles, but for the private sector, there is a wide gap between the total cost of ownership of EVs and traditional combustion engine vehicles. It’s more expensive overall and the Government is looking to reduce that impediment through the FBT system.


How the EV FBT exemption will work


The proposed FBT exemption is intended to apply to cars provided by an employer to an employee under the following conditions: 

Low and zero emission cars

  • Battery electric vehicles;
  • Hydrogen fuel cell electric vehicles; and ·
  • Plug-in hybrid electric vehicles. Be careful here because this doesn’t include all hybrid vehicles. To qualify the car needs to be ‘plug-in’. A car that has an internal combustion engine will not meet requirements unless it is able to be fuelled by a battery that can be recharged by an off-vehicle power source.


The car was first held and used on or after 1 July 2022

Where the car is first held and used on or after 1 July 2022. Provided the conditions of the exemption are met, an electric car that was ordered prior to 1 July 2022, but was not delivered until after 1 July 2022 would be eligible for the exemption (even if an employer acquired legal title to the car before 1 July 2022). However, a car delivered to you prior to 1 July 2022 would not qualify.

A second-hand electric car may qualify for the exemption, provided that the car was first purchased new on or after 1 July 2022.


Value below luxury car tax threshold for fuel efficient vehicles

The value of the car at the first retail sale must be below the luxury car tax threshold ($84,916 in 2022-23) for fuel efficient vehicles. The luxury car tax threshold generally includes GST and customs duty but excludes other items such as service plans, extended warranties, stamp duty and registration.


If an electric car qualifies for the FBT exemption, then associated benefits relating to running the car for the period the car fringe benefit is provided, can also be exempt from FBT.


Government modelling states that if an EV valued at about $50,000 is provided by an employer through this arrangement, the FBT exemption would save the employer up to $9,000 a year.


While the measure provides an exemption from FBT, the value of that fringe benefit is still taken into account in determining the reportable fringe benefits amount of the employee. That is, the value of the benefit is reported on the employee’s income statement. While income tax is not paid on this amount, it is used to determine the employee’s adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments.


Can I salary sacrifice an electric car?


Assuming your employer agrees, and the car meets the criteria, salary packaging is an option. While some FBT concessions are not available if the benefit is provided under a salary sacrifice arrangement, the exemption for electric cars will be available. For a salary sacrifice arrangement to be effective for tax purposes, it needs to be agreed, documented, and in place prior to the employee earning the income that they are sacrificing.


Government modelling suggests that for individuals using a salary sacrifice arrangement to pay for a $50,000 electric vehicle, the saving would be up to $4,700 a year.


Who cannot access the FBT exemption


Your business structure makes a difference.

By its nature, the FBT exemption only applies where an employer provides a car to an employee. Partners of a partnership and sole traders will not be able to access the benefits of the exemption as they are not employees of the business. When it comes to beneficiaries of a trust and shareholders of a company it will be important to determine whether the benefit will be provided to them in their capacity as an employee or director of the entity.


Exemption is limited to cars

As the FBT exemption only relates to cars, other vehicles like vans are excluded. Cars are defined as motor vehicles (including four-wheel drives) designed to carry a load less than one tonne and fewer than nine passengers.


EV State and Territory Tax Concessions

The Federal Government is not alone in using concessions to encourage electric vehicle ownership.


ACT

The ACT Government offers a stamp duty exemption on new zero emission vehicles, and up to two years free registration for new or second hand zero emission vehicles (registered between 24 May 2021 and before 30 June 2024).


New South Wales

Reimbursement of stamp duty paid on purchases of new or used full battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs), with a dutiable value up to and including $78,000.


Northern Territory

For plug-in electric vehicles (battery and hybrid plug-in), from 1 July 2022 until 30 June 2027, access free registration for new and existing vehicles and a stamp duty concession of up to $1,500 on the first $50,000 of the car’s market/sale value – 3% thereafter.


Queensland

Discounted registration duty for hybrid and electric vehicles. And, a limited $3,000 rebate for new eligible zero emission vehicles with a purchase price (dutiable value) of up to $58,000 (including GST) on or after 16 March 2022.


South Australia

A limited $3,000 subsidy and a 3-year registration exemption on eligible new battery electric and hydrogen fuel cell vehicles first registered from 28 October 2021.


Tasmania

From 1 July 2022 until 30 June 2022, no stamp duty applies to light electric or hydrogen fuel-cell motor vehicle (including motorcycles). Vehicles with an internal combustion engine do not qualify.


Victoria

A limited $3,000 subsidy is available for new eligible zero emission vehicles purchased on or after 2 May 2021. More than 20,000 subsidies are available under the program. Plus, stamp duty for ‘green passenger cars’ is set at the one rate regardless of value ($8.40 per $200 or part thereof). Zero emission vehicles receive a $100 annual registration concession but are also subject to a per kilometre road user charge.


Western Australia

A $3,500 rebate on the purchase of a new zero emission, hydrogen fuel cell or battery light vehicle with a value of up to $70,000 purchased on or after 10 May 2022.

Could your business survive without you?

By Clarke McEwan • September 17, 2025
Would your business still thrive, or would it suffer a catastrophic failure if you suddenly stepped away? It’s tough to remove yourself from the day-to-day operations when you’re passionate and busy. However sudden accidents, illnesses, or family emergencies can – and will – happen and you need to be able to step back knowing your systems are robust enough to cope. Build in resilience For your business to work for you, you need to make yourself replaceable. Large corporations have plans in place to mitigate what’s known as ‘Key Person Risk’. But when you run a small entrepreneurial venture, who is the backup?  The more you can train and empower your team to perform the business’s essential daily functions without micromanagement, the closer you'll be able to enjoy a lifestyle business. Establish repeatable and scalable support infrastructure to run the daily operations and create a great team that you can lean on. Your staff need a common purpose – knowing why what they’re doing matters – as well as clear expectations around their roles. By creating a suitable work environment, where employees both individually and as a team are more efficient and likely to enjoy what they do, you’ll breathe easier knowing they have your back (and your business) in an emergency. Finally, it’s important to know what the business looks like without you. An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it’s a plan that moves a business toward long-term goals and allows a smooth transition to a new phase. That may involve re-imagining business direction or leadership, keeping financially sustainable, or pivoting for challenges. A fully formed exit strategy takes all business stakeholders, finances and operations into account and details all actions necessary to sell or close. Strong plans recognise the true value of a business and provide a foundation for future goals and new directions. Top Tips: 1. No one is irreplaceable – Challenge yourself to step away for a week. Which systems fall over? Which procedures get left hanging? Which duties get ignored? Go cold turkey as a test case for the time you may have to leave your business in the hands of others. 2. Embrace innovation – Get systems that are simple, streamlined, effective and can be used by multiple key team members. Make sure anyone can log in and see exactly what’s needed for what reason at any time. 3.Recognise the value you’re creating - A business that doesn’t rely on its owner is worth a lot more when the time comes to sell or pass the reins to someone else. Talk to our team about structuring your business to make it more reliable.

Keeping your tax and expenses in check when you are self-employed

By Clarke McEwan • September 16, 2025
Working for yourself or running your own business? Setup robust systems for expenses & tax requirements so you can focus on your important tasks. We can help take the headaches out of your business accounting. #freelancelife #taxtalk #smallbusinesstips #contractors #medicalcontractor #businesscontractors #ABN

A win for those carrying student debt

By Clarke McEwan • September 9, 2025
20% reduction in student debt The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans: · HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP) · VET Student loans · Australian Apprenticeship Support Loans · Student Start-up Loans · Student Financial Supplement Scheme. The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied. If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you. The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility. Changes to repayments The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments. The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year. Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000. Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO. For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

Creating a more dynamic and resilient economy

By Clarke McEwan • September 9, 2025
The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations. The PC has now released its interim report which presents some draft recommendations that are focused on two key areas: · Corporate tax reform to spur business investment · Where efficiencies could be made in the regulatory space (ie, cutting down on red tape) The interim report makes some interesting observations and key features of the draft recommendations are summarised below. Corporate tax reform The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes. The first stage of this process would involve two linked components: · Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate. · New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion. Cutting down on red tape The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps. The proposed fixes include: · The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism. · Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered. · Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation. These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia. The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.

Non-compete clauses: the next stage

By Clarke McEwan • September 9, 2025
Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers. Treasury has since issued a consultation paper, seeking feedback in the following key areas: · How the proposed ban on non-compete clauses should be implemented; · Whether additional reforms are required to the use of post-employment restraints, including for high-income employees; · Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and · Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act. Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment. If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.

Superannuation guarantee: due dates and considerations for employees and employers

By Clarke McEwan • September 9, 2025
On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday. To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH). The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers. Employers To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date. Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions. If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO link below: The super guarantee charge | Australian Taxation Office Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this. Employees It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips. Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO. There is some helpful discussion on this process at the following link .
More Posts