The recent federal election has a lot of people hopeful that the Labour administration will make good on their promises. When it comes to electric vehicles, this could be a huge deal for many Australians.
This is thanks to the Electric Vehicle Car Discount promise - a proposed legislation that could provide an FBT (also known as fringe benefits tax) exemption for electric vehicles in the new financial year.
This proposal could make electric vehicles the most cost effective choice for both businesses and employees who participate in novated leasing by eliminating FBT and saving thousands of dollars each year. This article aims to explain the details of the proposal, as well as the benefits it could provide for you.
What is the proposed electric car FBT exemption legislation?
This proposed legislation from the labor government aims to provide a modification to the current FBT, with the overall aim to lower the Total Cost of Ownership for electric vehicles, bringing them closer to parity with motor vehicle and diesel fleet cars.
The current proposition will exempt most electric cars from the following:
Import tariffs - a 5.00% tax on some imported electric cars.
Fringe benefits tax (FBT) - a 47.00% tax on electric cars provided through a business for private use of the vehicle.
These exemptions are set to be made available to all eligible vehicles - namely electric vehicles - that fall below the current luxury car tax threshold for fuel-efficient vehicles. This value will be updated every financial year.
Because employees will be able to take the cars home overnight to experiment with home charging without incurring any FBT fees, it could allow managers of a large vehicle fleet to conduct more broad electric vehicle trials across their fleet. It also means that car manufacturers will be encouraged to supply more electric cars to Australia at lower prices.
How can this proposed legislation benefit you?
Employees will save thousands of dollars in FBT, which will magnify the benefits of salary packaging an electric vehicle over a petrol or diesel car. According to the Electric Vehicle Council, a $50,000 model could be $2,000 cheaper thanks to the removal of the import tariff, and could save up to $9,000 a year for drivers with the removed FBT.
We’ve taken the liberty of writing up an example comparison.
Let's say you choose to buy a Tesla Model 3. If you were to buy it outright with your after-tax salary, the running costs would add up to approximately $66,725.46
But with the new FBT-exempt novated lease option with smoothed fortnightly payments, your total cost would be closer to $61,370.46
The exemption means you could save $5,885.54 on the cost of the new car with a Novated Lease, as well as $36,533.90 in tax savings through your lease.
The result? $42,919.44 in savings with a Easi Novated Lease.*
*Prices are based $75,000 p/a income, 15,000 km and a 5-year lease.
The amount of savings you can get will increase as the value of the vehicle also increases - up to the luxury car tax threshold - making it clear to see how much you could get out of this proposed legislation. The labor government is hoping that this makes more Australians take the shift to electric vehicles - which have been typically unaffordable for most.
This new financing option will give workers more savings than the typical statuary lease method used in many car financing businesses. This method involves including a flat rate of 20% of a work vehicle for personal use.
Start the new financial year right with a fringe benefit exempt novated lease
With this new proposed legislation on the horizon, there is no better time to get a novated lease than now. At Easi, we will use our extensive knowledge and experience to give you the most savings possible, while avoiding minor infrequent and irregular payments thanks to a detailed plan.
To see how novated leases can create massive savings for you try our novated lease calculator or contact the Easi team today!
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