Electric Car FBT Exemption

The purchase and running costs of zero or low emissions vehicles first held and used on or after 1 July 2022 are currently exempt from fringe benefits tax (FBT). That means if your electric car is eligible, you do not need to pay FBT on it, or additional expenses associated with operating the car. 

In this article, we specify what requirements must be met to qualify for the EV FBT exemption, and the rules and implications surrounding the topic.

EV FBT exemption eligibility requirements

To encourage businesses to switch to electric vehicles for their company cars, the federal government introduced an EV FBT exemption for electric vehicles that were first held and used on or after 1 July 2022. There are, however, eligibility requirements to be aware of:

• The car must be a zero or low emissions vehicle
• The car must be used by a current employee or their associates (such as family members)
• Luxury car tax (LCT) must have never been payable on the importation or sale of the car

Vehicles charged solely by an internal combustion engine (such as the early Toyota Prius) are NOT eligible for the EV FBT exemption.

What’s considered a zero or low emissions vehicle? 

The ATO defines a zero or low emissions vehicle as a battery electric, hydrogen fuel cell electric, or a plug-in hybrid electric vehicle (PHEV). The vehicle must be designed to carry a load of less than 1 tonne and maximum 8 passengers. 

Note that using a company vehicle for travelling to and from work and for work-related activities such as visiting client sites, is exempt from FBT, irrespective of whether the vehicle is itself exempt.

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Additional car expenses exempt from FBT

If the car itself is eligible for an FBT exemption, some additional vehicle expenses you’ve incurred are also exempt. Those include: 

• Registration costs
• Insurance
• Maintenance and repairs
• Fuel costs (in this case, electricity used to charge the vehicle)

Luxury car tax threshold

Luxury car tax (LCT) applies to vehicles whose GST (goods and services tax) inclusive values are higher than the LCT threshold.

The threshold for the 2022-23 financial year was $71,849 for vehicles NOT classified as fuel-efficient and $84,916 for fuel-efficient vehicles (vehicles, where fuel consumption is at 7 litres per 100 kilometres or lower). 

This threshold has increased for the 2023-24 financial year to $76,960 and $89,332 respectively. 

Example: If you buy an EV for more than $89,332 including GST and any accessories that are sold with the vehicle, you are not eligible for an FBT exemption. 

FBT law change around plug-in hybrid electric vehicles (1 April 2025)

The federal government is changing the rules around plug-in hybrid electric vehicles (PHEV), which will no longer be exempt from FBT from 1 April 2025. 

This means only fully electric vehicles will be eligible for FBT from this date.

There is an exception for PHEVs that were purchased before 1 April 2025 and are under a financially binding agreement, such as a lease that ends after the rule change. However, any extension of the agreement (for example, if the lease was extended for another two years) is not eligible for the EV FBT exemption and it would be subject to FBT once the original lease expires.

EVs eligible for an FBT exemption

There’s an extensive list of vehicle brands and models eligible for the electric vehicle exemption, but some of the common manufacturers are:

• Tesla
• BYD
• Kia
• Hyundai
• MG
• Polestar

Individual models may be subject to the luxury car tax, so you will need to confirm at the time of purchase that the price is below the LCT threshold of $89,332.

For more information regarding electric car exemption from FBT, head to the official ATO guide on the topic. 

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