Electric Car Discount Explained

The future of novated leasing is electric!

The Federal Government in Australia has passed legislation for a Fringe Benefit Tax (FBT) exemption on electric vehicles (EVs). 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 $84,916. These include battery electric vehicles and hydrogen fuel cell electric vehicles. Plug-in hybrid electric vehicles are also eligible up until 1 April 2025. The FBT exemption only applies to EVs used by businesses or financed under a novated lease.

This legislation is aimed at encouraging the uptake of EVs and encouraging car manufacturers to import more affordable electric models to Australia. Estimates suggest that there could be savings of between $4,000 and $10,000 in income tax each year for individuals who opt for EVs under a novated lease.

The passing of this legislation has been welcomed by businesses and organisations that support sustainable transportation. Sustainability is central to Simplygreen’s mission. Since 2007 we’ve been offsetting 100% of carbon emissions for our novated lease clients. We are extremely excited to help our members take advantage of the FBT exemption and make the switch to an EV!

In addition to the FBT exemption, the Federal Government has also announced $74.5 million in funding for EV charging infrastructure. This includes $15 million for fast-charging stations along highways and major regional roads, as well as $59.5 million for home and workplace charging stations.

Overall, the combination of the FBT exemption and government funding for EV charging infrastructure is expected to provide a major boost to the adoption of EVs in Australia. This is a positive step forward in the country’s efforts to reduce greenhouse gas emissions and transition to a more sustainable transportation system.

WHAT DOES THIS MEAN FOR simplygreen members?

The introduction of the Electric Car Discount means you can finance an EV (under a novated lease) and pay for all the associated costs (rego, insurance, etc) using pre-tax dollars.

The below comparison between a Mazda CX-5 Maxx Sport and Tesla Model Y speaks for itself.

Please note: This comparison is based on an annual salary of $100,000 (excluding superannuation) per annum, 36 month lease term, 15,000km per annum. Cost and savings may vary depending on individual circumstances. All novated leases are subject to finance approval.

What is a novated lease?

A novated lease is a type of salary sacrifice arrangement where you agree to sacrifice a portion of your salary in exchange for a fully maintained vehicle.

Under a novated lease, the employer typically passes the Fringe Benefits Tax (FBT) liability onto the employee. However, with the new legislation, employers will no longer be required to pay FBT on eligible EVs provided under a novated lease. This means that employees who choose to salary sacrifice for an EV under a novated lease may be able to save money on their taxable income compared to other avenues for purchasing an EV.

In addition to the potential tax savings, novated leasing for EVs can also provide other benefits for both employees and employers. For employees, it can make it easier to afford an EV by allowing them to spread the cost of the vehicle over a longer period of time. For employers, it can help to attract and retain talent by offering a competitive salary sacrifice benefit.

Overall, novated leasing is an attractive option for individuals and businesses looking to transition to EVs, and the new FBT exemption is expected to further increase the popularity of this type of arrangement in Australia.

what type of vehicles are eligible for the exemption?

The introduction of the Electric Car Discount means that individuals will be exempt from paying FBT on zero or low emission vehicles below the luxury car tax threshold.

A zero or low emissions vehicle includes:

• A battery electric vehicle
• A hydrogen fuel cell electric vehicle
• A plug-in hybrid electric vehicle

To be eligible for the FBT Exemption, the car must also meet the below criteria:

• Below the luxury car tax threshold (LCT) which is $84,916 for the 2022/23 financial year
• First held for use from 1st July 2022 onwards (so it applies retrospectively)
• Additionally, the exemption applies to plug-in hybrid electric vehicles (PHEVs) 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.