EV Novated Lease Requirements
Important things to note about the Australian Government’s employer FBT exemption legislation for Electric Vehicles EV vehicles.
Eligible vehicle criteria
Vehicles that are Battery Electric (BEV), Hydrogen Fuel Cell (FCEV) or Plug In Hybrid (PHEV).
Must be deemed a ‘car’ for Fringe Benefit purposes (under 1 tonne payload and 8 seats or less).
New and Used vehicles that are first held and used on or after 1 July 2022 (first ever registered after 01/07/2022).
Must be provided to a current employee.
Must never have sustained Luxury Car Tax (LCT). In relation to a lease of a New EV starting between 1 July 2023 to 30 June 2024, there must be evidence that the supply from the EV vendor to Toyota Fleet Management TFM was a supply on or after 1 July 2023 and did not exceed the LCT threshold for fuel-efficient cars which is GST inclusive $89,332 + on road costs for the financial year ending 30 June 2024. In determining whether the $89,332 threshold is exceeded, all options and accessories and dealer delivery must be included. The applicable LCT threshold for New or Used (provided the Used when New was first registered on or after 1 July 2022), of EV vendor supplies to TFM in the year ending 30 June 2023 was GST inclusive $84,916 + on road costs.
PHEV cars are subject to a transition rule under which employer FBT exemption will cease if first commitment to application and use of the PHEV car is on or after 1 April 2025.
How could this Bill impact you?
The employer FBT exemption legislation for EVs should result in material packaging gains for an employee, as compensation costs to the employer for the FBT exempt novated lease is entirely pre-tax and thus is more income tax effective.
For employees of exempt or rebatable employers, this employer FBT exemption, will not impact or utilise the per employee cap and therefore the cap can be used for other fringe benefits.
Employee’s Reportable Fringe Benefits Amount (RFBA) for an FBT year will still be required to be determined and reported, as if there was no employer FBT exemption.
While the RFBA is not personal taxable income to the employee, the total RFBA from all employment is taken into account when determining the eligibility for certain government benefits, concessions, and calculating various payments. Examples where RFBA amounts may have potential adverse impacts to an individual and their family include: changes to HECS/HELP debt repayments, Child Care Subsidies, Family Tax Benefits, Child Support obligations etc. A full list can be found at this link on the ATO website. The RFBA will be shown on the employee’s income statement through ATO online services in myGov.
Things to consider
This information provided is of general nature and does not take into account your personal needs and financial circumstances. Nothing in this correspondence constitutes or should be considered to constitute legal, taxation or financial advice. TFM recommends that you seek independent advice from a qualified legal, financial or tax advisor, who can advise you about your personal circumstances.
