Electric vehicles (EVs) are becoming increasingly popular across Australia, and many employers are now offering them to staff as part of salary packaging arrangements or company car benefits. While electric cars can be exempt from Fringe Benefits Tax (FBT), there are important compliance requirements that employers need to understand.
If you’re providing electric vehicles to employees in 2025, here’s what you need to know about FBT exemptions, reporting obligations, and the recent changes affecting plug-in hybrid vehicles.
FBT Exemption for Electric Cars
From 1 July 2022, certain electric cars provided for private use by employees may be exempt from FBT. This exemption can result in significant tax savings for both employers and employees, making EVs an attractive option for company vehicle programs.
Eligibility Criteria
To qualify for the FBT exemption, the vehicle must meet all of the following criteria:
- Be a zero or low emissions vehicle: This includes battery electric vehicles, hydrogen fuel cell vehicles, or plug-in hybrid electric vehicles (though PHEVs have specific restrictions from 1 April 2025)
- First held and used on or after 1 July 2022: The vehicle must have been acquired and made available after this date
- Used by a current employee or their associates: The benefit must be provided to an employee or their family members
- Not subject to Luxury Car Tax (LCT): The vehicle must not have attracted LCT at any point
This exemption applies to both salary-packaged vehicles and employer-provided vehicles.
Important Change: Plug-in Hybrid Sunset Clause
As of 1 April 2025, plug-in hybrid electric vehicles (PHEVs) are no longer considered zero or low emissions vehicles for FBT exemption purposes.
Grandfathering Provisions
PHEVs may still qualify for the exemption if:
- The exemption was already in place before 1 April 2025, AND
- There is a financially binding commitment to continue providing the vehicle
If your business provides PHEVs to employees, review your arrangements to understand whether the exemption still applies or if FBT will now be payable.
What Still Needs to Be Reported?
Here’s a critical point many employers miss: even if an electric vehicle is exempt from FBT, reportable fringe benefits may still apply.
Reportable Fringe Benefits Explained
Employers must disclose the taxable value of the benefit on the employee’s payment summary. This reportable amount doesn’t result in additional tax for the employer, but it can affect the employee’s:
- Eligibility for government benefits
- Income-tested obligations (such as HECS/HELP repayments)
- Medicare levy surcharge calculations
- Other means-tested entitlements
What Gets Included?
When calculating the reportable fringe benefit amount, you must consider associated car expenses, including:
- Vehicle registration
- Insurance
- Repairs and maintenance
- Electricity used to charge the vehicle
Calculation Methods
To calculate the reportable amount accurately, the employee receiving the vehicle benefit needs to have kept a complying logbook for a 12-week period. Without a complying logbook, the statutory method will apply, which may result in a higher reportable amount.
Key Compliance Requirements for Employers
If you’re providing electric vehicles to employees, here’s what you need to do:
- Review vehicle arrangements annually
Ensure your EVs continue to meet the FBT exemption criteria and that you’re meeting all reporting obligations. - Implement logbook requirements
Ensure employees or directors complete complying logbooks for the required 12-week period. This is essential for accurate calculation of reportable fringe benefits. - Track usage and expenses
Maintain accurate records of all expenses related to the EV, including electricity charging costs, to determine reportable amounts correctly. - Communicate with employees
Make sure employees understand how fringe benefits may affect their tax obligations and income-tested entitlements, even when FBT is exempt. - Stay updated on changes
With the PHEV sunset clause now in effect, ensure you’re across any changes that affect your vehicle fleet.
Why This Matters
Electric vehicles offer significant environmental benefits and can provide tax advantages for both employers and employees. However, the tax implications are more complex than simply claiming an FBT exemption.
Understanding the nuances of FBT exemptions, reportable fringe benefits, and logbook requirements ensures:
- Your business remains compliant with ATO obligations
- Employees can make informed decisions about salary packaging
- You avoid unexpected tax consequences
- Your reporting is accurate and complete
Common Questions About EVs and FBT
Do all electric cars qualify for FBT exemption?
No. The vehicle must meet all four eligibility criteria, including not being subject to Luxury Car Tax. High-value EVs that attract LCT do not qualify for the exemption.
What happens if I provided a PHEV before 1 April 2025?
If the exemption was in place before 1 April 2025 and you have a financially binding commitment to continue providing the vehicle, the exemption can continue to apply (grandfathering).
Do I still need to report FBT-exempt EVs?
Yes. Even though the benefit is exempt from FBT, you must still report the taxable value as a reportable fringe benefit on the employee’s payment summary.
What if my employee doesn’t keep a logbook?
Without a complying logbook, you’ll need to use the statutory method to calculate the reportable fringe benefit amount, which typically results in a higher value.
How Paris Financial Can Help
Navigating FBT obligations for electric vehicles requires careful attention to eligibility criteria, calculation methods, and reporting requirements. At Paris Financial, we help employers:
- Determine if your EVs qualify for FBT exemption
- Calculate reportable fringe benefit amounts accurately
- Implement complying logbook systems
- Review PHEV arrangements following the 1 April 2025 changes
- Ensure all FBT reporting obligations are met
- Provide clear guidance to employees about tax implications
Our experienced team stays up-to-date with the latest ATO guidance to ensure your business remains compliant.
Need Advice on Electric Vehicles and FBT?
If you’re considering offering electric vehicles to employees, or you already provide EVs and want to ensure you’re meeting all compliance requirements, contact Paris Financial today.
Our team can review your arrangements, advise on your obligations, and help you implement the right systems to manage FBT effectively.
For more detailed information about FBT and electric vehicles, visit the ATO’s official guidance or speak with our team.
Disclaimer: This article provides general information about FBT and electric vehicles based on current ATO guidance. Tax rules are complex and every situation is different. Please contact Paris Financial or your registered tax agent for advice specific to your circumstances.
