One of the main selling points of an electric vehicle is the long term savings it provides. Because of this, it’s important to consider all financial factors when making such a big decision for your next car.
Luckily, our Easi Experts are back again to help provide more insight into novated leasing for electric vehicles. This guide aims to discuss the reportable fringe benefit amount relating to getting an EV through a novated lease.
An Introduction to FBT and Electric Cars
Treasury Laws Amendment (Electric Car Discount) Act 2022 (the Act) provides an FBT exemption for eligible EVs, as a strategy to increase their uptake in Australia.
EVs still hold a requirement to calculate and disclose the Reportable Fringe Benefits Amount (RFBA), as if the car had been taxable, in your employees’ income statements.
You need to report for an employee if the taxable value of their reportable fringe benefits is more than $2,000 in the FBT year (1 April to 31 March).
What is Fringe Benefits Tax?
Fringe benefits tax (FBT) is a tax paid by employers on certain benefits provided to their employees, or to their employees’ family or other associates. FBT is separate to income tax. It's calculated on the taxable value of the fringe benefit.
FBT applies to fringe benefits provided by an employer to your employees, or to your employees' families or other associates. Our guide on how to calculate novated lease FBT explains this in more detail.
The Australian Taxation Office (ATO) website also has additional information on fringe benefits.
Who Pays FBT?
The employer is responsible for having to pay fringe benefits tax to the ATO.
What is the FBT Rate?
FBT is paid at the highest marginal tax rate - which is 47%
FBT Exemption Criteria
The FBT exemption for EVs comes with a set of criteria that businesses must meet to qualify including:
The vehicle is a zero or low-emissions car. This means the vehicle must be a battery electric vehicle (BEV), hydrogen fuel cell vehicle (HFCV), or a plug-in hybrid vehicle (PHEV).
It was acquired after 1st July 2022
It is used or available for private use by current employees or their associates; and
Luxury car tax (LCT) is not payable on the supply or importation of the vehicle.
Get Luxury Car Tax explained for you in our guide!
How to Calculate Reportable Fringe Benefits Tax Amount for and Electric Vehicle
Despite the FBT exemption, businesses must calculate and report the value of the benefit for employees with reportable fringe benefit amounts (RFBA) exceeding $2,000 in an FBT year. RFBA affects various financial aspects, including Medicare Levy Surcharge, tax offsets, family assistance payments, and more.
Example:
Electric car fringe benefit tax base value of $89,000
Notional fringe benefit: $17,800
RFBA: $17,000 x 1.8868 = $33,585.04
ATO Fringe Benefits Gross Up Rates
The current gross-up rates from the Australian Taxation Office are as follows:
2.0802 for Type 1 benefits;
1.8868 for Type 2 benefits; and
1.8868 for Reportable Fringe Benefits.
How Can I Claim Home Charging in a Novated Lease?
The Australian Taxation Office (ATO) provides practical guidance through Practical Compliance Guidelines (PCG) 2024/2, offering clarity on home charging rates and obligations. Under the PCG, businesses can use an assumed EV home charging rate (e.g., 4.2 cents/km) for calculation purposes, considering both commercial and home charging expenses.
Let Easi Help You Drive the Electric Vehicle of Your Dreams
Spending lots of time looking into fringe benefits tax year after year can become quite exhausting - but the team at Easi are here to help make it easier.
Our novated leasing specialists can walk you through every step of the novated lease process and answer any questions you may have about things such as total taxable value, the reportable fringe benefits provided to you, and more. Then, when you’re ready to get started, we can help you decide on the right EV for you.
Get in touch with us today to kickstart your EV journey and save even more on your tax with a novated lease!
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