Electric Vehicle Affordability and Uptake Boosted by FBT Exemption on Novated Leases

The popularity of electric vehicles across Queensland and the rest of Australia is growing all the time, largely driven by the Federal Government’s Electric Car (EV) Discount that became law in December 2022.

The discount – introduced to boost uptake of electric vehicles (EVs) and encourage car manufacturers to import and supply more affordable electric models in Australia – exempts Fringe Benefits Tax (FBT) on eligible EVs.

Crucially, it only applies to the personal use of electric cars operated by businesses – or financed under a novated lease.

At RemServ, we’re committed to supporting our novated leasing customers to take advantage of the FBT exemptions while minimising their environmental impact.

Electric Vehicle Discount Detail

The EV Discount applies to fringe benefits provided on or after 1 July 2022 for eligible zero or low-emission vehicles that are held and used on or after 1 July 2022.

It includes an exemption to the requirement to pay fringe benefits tax (FBT) on zero or low-emission vehicles that fall below the luxury car tax threshold of $91,387 for low-emission vehicles.

These include battery electric vehicles and hydrogen fuel cell electric vehicles, as long as the vehicle is first held and used from 1 July 2022.

Plug-in hybrid electric vehicles (PHEVs) are also eligible up until 1 April 2025. From that date, those on pre-existing leases are still entitled to the FBT exemption up until the end of their lease, so long as a commitment is made before 1 April 2025.

The FBT exemption only applies to the personal use of electric cars operated by businesses – or financed under a novated lease. Because there is no post-tax component to deductions, a novated lease on an EV differs from that of an Internal Combustion Engine (ICE) Vehicle.

As stated by Federal Treasurer Jim Chalmers in 2022, “the cost to employees of entering into salary sacrificing arrangements in order to lease an eligible electric car will now be less than it previously would have been”.

Separately, the Government has also removed the 5% import tariff exemption that applied to some imported EVs.

Employers will need to include FBT-exempt electric cars as a reportable fringe benefit on an employee's payment summary. We recommend you seek financial advice on what impact this could have to your personal circumstances, including means-tested government benefits.

How Much Could the Discount Save You?

There are potential FBT savings on EV models costing up to the $91,387 luxury car tax threshold, as of the 2024-25 financial year, for eco-friendly vehicles.

It’s also worth noting that electric cars may also be cheaper to run and maintain, making them even more attractive to potential drivers. By way of example, Nissan estimates that a NSW commuter can save $30 a week by switching from a petrol car to its Leaf model.

The discount, alongside the many other benefits of novated leasing, could be a great way to make your money work for you.

One of Queensland’s leading EV-Novated Leasing Providers

RemServ is one of Queensland’s most experienced novated leasing providers, servicing thousands of employees each year from organisations across the Sunshine State.

With decades of experience, we know all about novated leasing and the potential benefits of salary packaging a car – and with the adoption of EVs evolving quickly we’re committed to our vision of being the partner of choice in supporting customers’ transition to low and zero-emission vehicles.

Have you considered an electric or hybrid for your next car? Give us a call on 1300 303 940 and put our expertise to the test.

We’ll Keep You Informed

At RemServ we believe EV educational information is important. We will continue to work with industry groups such as NALSPA (National Automotive Leasing and Salary Packaging Association) and the Electric Vehicle Council, the national body for the electric vehicle industry in Australia, to provide you with the latest EV updates, including those from the Federal Government’s National EV Strategy.

We hope to provide further updates relating to claiming on home-charging very soon.

If you’d like to know more about the ins and outs of electric vehicles, how novated leasing works with an EV and any other commonly asked questions, check out our website here.

* Sourced from TREASURY LAWS AMENDMENT (ELECTRIC CAR DISCOUNT) BILL 2022