The shift to electric vehicles (EVs) in Australia is no longer just about sustainability — it’s also about smart business. With rising fuel prices, environmental targets, and changing expectations from employees, companies are looking for cost-effective ways to modernise their vehicle offerings. One of the most compelling incentives? The Fringe Benefits Tax (FBT) exemption for electric vehicles.
If your business provides vehicles to employees — either directly or through salary packaging — this exemption could deliver significant savings.
What Is the FBT Exemption for Electric Vehicles?
Since 1 July 2022, eligible electric vehicles that are provided to employees for private use have been exempt from Fringe Benefits Tax. This exemption forms part of the government’s broader commitment to reducing transport emissions and encouraging electric vehicle adoption across Australia.
The FBT exemption doesn’t just apply to the car itself — it also extends to associated running costs, such as registration, insurance, servicing, and even charging.
This means employers can provide an electric vehicle as part of a remuneration package without incurring FBT, offering tax savings and a more attractive benefit for employees.
What Vehicles Qualify?
To be eligible for the FBT exemption in the 2024–25 financial year, the vehicle must meet all of the following conditions:
– It must be a battery electric vehicle (BEV), hydrogen fuel cell vehicle, or plug-in hybrid electric vehicle (PHEV)
– It must have been first held and used on or after 1 July 2022
– The vehicle’s value must be below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles (currently $91,387 for 2024–25)
– It must not have been subject to LCT when sold or imported
– It must be made available for private use by a current employee or their associate
⚠️ Plug-in Hybrids Recently Lose Eligibility
From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer be considered eligible for the exemption — unless the vehicle was already provided to an employee under a financially binding agreement before that date.
If your business is considering providing a PHEV, now is the time to act to secure access to the exemption under the transitional rules. Beyond that, full battery electric vehicles will be the way forward.
🧾 Do You Still Need to Lodge an FBT Return?
Yes — even if the electric vehicle is exempt from Fringe Benefits Tax, employers may still be required to lodge an FBT return.
Here’s what you need to know:
– The exempt vehicle still needs to be reported as a reportable fringe benefit on your employee’s income statement (if the notional taxable value exceeds $2,000).
– You must still keep adequate records to demonstrate that the vehicle meets the exemption criteria (vehicle type, first use date, purchase price, etc.).
– If you provide other taxable fringe benefits (e.g. entertainment, car parking), an FBT return will still be required — and the electric vehicle will form part of your broader FBT reporting obligations.
In short, exempt doesn’t mean invisible. Accurate reporting ensures compliance and avoids problems later if the ATO reviews your benefits.
Why This Matters to Your Business
Providing vehicles to employees can be a costly benefit, especially when FBT is involved. By switching to electric vehicles that qualify for the exemption, businesses can reduce tax exposure while offering a desirable and future-focused benefit to staff.
The exemption also supports corporate sustainability goals, aligns with environmental commitments, and can enhance your brand’s reputation with both employees and customers.
Whether you’re reviewing your current vehicle policies or exploring salary packaging options, this is an opportunity worth considering.
