If you feel guilty for adding to the environment’s vehicle emissions burden, here is some good news. Soon you may be able to purchase an electric car at a huge discount, good for both you and the future of the planet.

No, the discount won’t come from a manufacturer or car dealer, instead the from Australian government! It has just introduced Treasury Laws Amendment (Electric Car Discount) Bill 2022, intending to exempt the provision of an electric car (including a hybrid) to an employee from fringe benefits tax.

The upshot of the technical mumbo jumbo is, in order to obtain the discount, you need to do more than just purchase the car. You have to enter into a salary sacrifice arrangement, under which your employer has to purchase the car, from the future salary you are to forgo.

The discount is quite amazing – if you have an annual salary of $100,000 and the car is $60,000, the tax saving is about $18,000. It’s achieved as the $60,000 is no longer reported as income in your tax return, instead the marginal tax rate is applied to only $40,000. The bigger your car benefit, the higher the tax saving.

This doesn’t mean your dream of driving a Porsche Cayenne Turbo S can be realised in this arrangement. Unfortunately for some, the purchase price must be below the luxury car threshold (for electric vehicles and fuel efficient cars) of $84,916 for 2022-23. The rules are to be reviewed in 3 years, giving some certainty to taxpayers to act now.

It would be a much easier incentive to simply provide you a tax deduction directly for the purchase price of the car. However, this is a great opportunity to go green and truly too good to ignore.

In Summary

The Treasury Laws Amendment (Electric Car Discount) Bill 2022 sets to make salary-packaged low-emission and electric vehicles, priced under the LCT threshold, exempt from FBT provided that:

  • the car is a zero or low emissions vehicle being Battery electric vehicles, hydrogen fuel cell electric vehicles and plug-in hybrid electric vehicles
  • the value of the car at the first retail sale was below the luxury car tax threshold for fuel efficient vehicles, being ($84,916 in 2022-23) and
  • the car is first held and used on or after 1 July 2022.

We’re ready to help. As is the case with newly introduced legislation, adjustments may be made before the final version is passed. In the meantime, if you are ready to consider your options and the potential impact on the reportable fringe benefits, please speak with our advisors on +61 3 9820 6400.

Key Contact
Jian Buck Xiao
Buck Xiao

Director Taxation

This is not advice. You should not act solely on the basis of the material contained in this post. These are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.

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