What is Fringe Benefits Tax?
Treasury Laws Amendment (Electric Car Discount) Act 2022 (the Act) provides an FBT exemption for eligible EVs, as a strategy to increase their uptake in Australia.
EVs still hold a requirement to calculate and disclose the Reportable Fringe Benefits Amount (RFBA), as if the car had been taxable, in your employees’ income statements.
You need to report for an employee if the taxable value of their reportable fringe benefits is more than $2,000 in the FBT year (1 April to 31 March).
Fringe benefits tax (FBT) is a tax paid by employers on certain benefits provided to their employees, or to their employees’ family or other associates.
FBT is separate to income tax. It's calculated on the taxable value of the fringe benefit.
FBT applies to fringe benefits provided by an employer to your employees, or to your employees' families or other associates.
For a list of what is considered a fringe benefit, refer to the ATO website. What is a fringe benefit? - ATO
Who Pays FBT?
The employer is responsible for paying fringe benefits tax to the ATO.
What is the FBT Rate?
FBT is paid at the highest rate of tax which is 47%
FBT Exemption Criteria
The FBT exemption for EVs comes with a set of criteria that businesses must meet to qualify including:
- The vehicle is a zero or low-emissions car. This means the vehicle must be a battery electric vehicle (BEV), hydrogen fuel cell vehicle (HFCV), or a plug-in hybrid vehicle (PHEV).
- It was acquired after 1st July 2022
- It is used or available for private use by current employees or their associates; and
- Luxury car tax (LCT) is not payable on the supply or importation of the vehicle.
- See our blog on LCT here!
How to calculate Reportable Fringe Benefits Tax Amount for Electric Vehicle
Despite the FBT exemption, businesses must calculate and report the value of the benefit for employees with reportable fringe benefit amounts (RFBA) exceeding $2,000 in an FBT year. RFBA affects various financial aspects, including Medicare Levy Surcharge, tax offsets, family assistance payments, and more.
Example:
- Electric car FBT base value of $89,000
- Notional fringe benefit: $17,800
- RFBA: $17,000 x 1.8868 = $33,585.04
ATO Fringe Benefits Gross up Rates:
- Gross-up rates:
- 2.0802 for Type 1 benefits;
- 1.8868 for Type 2 benefits; and
- 1.8868 for Reportable Fringe Benefits.
How can I Claim home charging in a novated lease?
The ATO has create a practical compliance guide PCG 2024/2 - https://www.ato.gov.au/law/view/pdf/cog/pcg2024-002.pdf
The Australian Taxation Office (ATO) provides practical guidance through Practical Compliance Guidelines (PCG) 2024/2, offering clarity on home charging rates and obligations. Under the PCG, businesses can use an assumed EV home charging rate (e.g., 4.2 cents/km) for calculation purposes, considering both commercial and home charging expenses.
Credit: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/how-fringe-benefits-tax-works
