FBT for 2023 – Electric vehicles exemption
Employee / Contractor Distinction
13/03/2023
ATO’S new working from home deduction rules
13/03/2023
FBT for 2023 – Electric vehicles exemption
The government with the recent Treasury Laws Amendment (Electric Car Discount) Bill 2022 introduced FBT exemptions for cars that are classified as zero or low emission vehicles and are provided to a current employee as a car fringe benefit.
If the zero or low emission vehicles qualifies for the FBT exemption, then the following associated benefits relating to the car for the period the car fringe benefit is provided can also be exempt from FBT:
- Registration
- Insurance
- Repairs or maintenance; and
- Fuel, including electricity to charge and run the vehicle.
Key Conditions
- Timing
The FBT exemption can apply to benefits provided from 1 July 2022.
- In order to qualify for the FBT exemption, the car needs to be first held and used on or after 1 July 2022.
- The ATO’s guidance in its fact sheet ‘Electric cars exemption’ suggest the electric car can potentially qualify if it is used for the first time on or after 1 July 2022 (even if it is held before this date).
- If a new car was delivered prior to 1 July 2022 but first made available for use (e.g., to an employee) on or after 1 July 2022, then the car may qualify (assuming the other conditions are satisfied). However, a car first used or made available to an employee prior to 1 July 2022 should not qualify.
- Zero or low emission cars
- Battery electric vehicles
- Hydrogen fuel cell electric vehicles
- Plug-in hybrid electric vehicles (until 31 March 2025)
- LCT Threshold
- To qualify, the value of the car at the first retail sale (and any subsequent sale) must be below the luxury car tax threshold for fuel efficient vehicles ($84,916 in 2023).
Key Limitations
Reportable fringe benefits
Even if the car qualifies for the FBT electric vehicle exemption, it is important to be aware that the value of that fringe benefit is still taken into account in determining the reportable fringe benefits amount of the employee. That is, the value of the benefit is reported on the employee’s income statement.
Sole traders and partners
Not available to cars provided to sole traders and partners
Dual capacity employees
Required to be provided to the individual in their capacity as a current employee (i.e., not shareholder or beneficiary).
Consequences of a worker’s classification.
If the worker is treated as an employee of the engaging entity;
| Engaging entity | Worker |
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If the worker is treated as a genuine independent contractor;
| Engaging entity | Worker |
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Risk framework that will be used by the ATO for worker classification
Issues
Very low
- Evidence that both parties agreed on classification
- Evidence that both parties understand tax and super consequence
- Performance of arrangement hasn’t deviated significantly from contractual rights and obligations
- Business obtained specific advice confirming classification was correct
- Business is meeting correct tax, super and reporting obligations
Will compliance resources be applied?
- NO
Low
- Same criteria as ‘very low’
- No evidence to show both parties understood tax and super consequences
Will compliance resources be applied?
- will only be applied to determine whether the worker meets the extended definition of an employee if the ATO is responding to an unpaid superannuation query
Medium
- Evidence both parties agreed on classification
- Business obtained advice confirming classification was correct
Will compliance resources be applied?
- YES, but will be given lower priority than high risk arrangements
High
- does not fall in the very low, low or medium-risk categories.
Will compliance resources be applied?
- YES, and will be given highest priority
- Business may be subject to higher penalties if classification is wrong
Disclaimer
This content is intended for general information in summary form on tax and legal matters at the time of first publication and is not intended to provide and should not be relied upon in place of appropriate professional advice. Please consult your tax, legal and accounting advisors before acting or relying on any content provided.
