Electric Vehicle Fringe Benefit Tax explained

Few employee perks can trump a company car (pizza parties run a close second), but if you’ve ever thought about providing a set of wheels for your staff, you’ll have found that the Fringe Benefits Tax can give your ABN savings a serious uppercut.

In an effort to keep the rest of the world from accelerating away from us towards an electric car future, however, the Australian Government introduced an electric vehicle FBT exemption in 2022.

What this means is that if you decide to provide an eligible EV as part of a salary package, you can reap all the usual benefits that come with buying a car with your ABN.

Normally, FBT (FBT meaning Fringe Benefits Tax) applies when an employer provides a non-cash benefit to an employee in place of, or in addition to, their salary.

These perks are called encouragement rewards. No, sorry, they’re called fringe benefits, and usually materialise as things like gym memberships, free concert tickets and company cars.

In the case of company cars, the tax is triggered only when the vehicle is used for personal purposes (going to Bunnings for a sausage sandwich isn’t work, unless you’re a tradie) rather than for work.

How much is FBT on a car? Using the Statutory Method, FBT is charged to the employer by applying a 47 per cent tax to a grossed-up 20 per cent of the car’s value.

Yes, that does sound typically ATO complex, but fortunately there’s a handy FBT Calculator that crunches the numbers for you. Usually there’s a fair bit of record keeping involved when it comes to FBT, but the electric car FBT exemption lightens the load considerably.

Why are EVs exempt?

The government wants more people driving cleaner, greener cars as it works towards its zero-carbon goals in 2500, no, sorry 2050, and an FBT exemption for electric vehicles is a clever sleight of hand to achieve that goal.

In the short term, business owners save thousands of dollars while making their fleets cheaper to run (no fuel costs, if they can use solar to charge their EV fleets the savings are even bigger) and more environmentally friendly.

As a bonus, because fleet vehicles are often sold after three to four years, the theory goes that the second-hand market will soon have a healthy supply of relatively new EVs – many still under warranty – at more affordable prices for everyday Aussies.

What are the requirements?

Paying no FBT on electric cars is a great way to save money, but there are strings attached. First, it must be a battery-electric vehicle (BEV), a hydrogen fuel cell vehicle (FCEV) and good luck with that, or a plug-in hybrid electric vehicle (PHEV).

No matter which one you go for, the car must be used by a current employee or an immediate family member. Keep in mind that the PHEV FBT exemption will end on 1 April 2025, while the BEV one will continue.

Second, the car must have been first purchased and used on or after 1 July 2022. If you bought an EV before that date, the prize for early adoption is paying the standard rate of FBT.

Finally, the car’s price must be under the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles (currently sitting at $91,387) to qualify for the exemption. Being the golden goose that it is, the LCT clause doesn’t just apply to the initial sale – it sticks with the car for life.

So, even if you manage to find a used Porsche Taycan priced under the current LCT threshold, it won’t qualify for the FBT exemption, now or ever. Luxury Car Tax exemptions do not seem to be on the table for FBT purposes.

To further sweeten the deal, cars that qualify for the FBT exemption also get FBT-free running costs, including registration, insurance, maintenance, repairs, and even the electricity used for charging.

However, installation costs for a home charging station aren’t exempt and would still attract FBT if covered by the employer.

It’s worth noting that although your EV and charging costs are exempt from FBT, the benefit is still reportable. Calculating it is a matter of multiplying the total kilometres driven by the percentage of charging done at home, then applying the EV home charging rate of 4.20 cents per kilometre.

If commercial charging is used, you should include those costs only if you can accurately determine the split between home and external charging.

Top FBT exempt vehicles

1. Tesla Model 3

If you can separate the car from the artist, it’s still one of the best EVs out there – especially after a recent refresh that brought interior upgrades, a sleeker front-end design, and a quieter ride. Prices start at $54,900, before on-road costs, for the 2025 Model 3 RWD and rise to $80,900 for the full-fat Performance AWD (still well under FBT).

• Manufacturer: Tesla
• Key Specs: Up to 629km claimed WLTP range, RWD or AWD
• Warranty: four years/80,000 km (vehicle), eight years/160,000km (battery and drive unit)
• Why Consider It? Class-leading efficiency, Supercharger network, and an ultra-minimalist interior (which you’ll either love or tolerate).
• More Info: Tesla Australia

2. Hyundai IONIQ 5

Hyundai’s retro-futuristic SUV is outrageously cool looking, with a thoughtful interior that’s put together with a real sense of purpose and quality. All but the $110,000 range-topping “N” variant meet the EV FBT threshold.

• Manufacturer: Hyundai
• Key Specs: Up to 570km claimed WLTP range, RWD or AWD, 800V fast-charging
• Warranty: five years/unlimited kilometres (vehicle), eight years/160,000km (battery)
• Why Consider It? Retro-futuristic looks, roomy interior, and ultra-fast charging.
• Learn more: Hyundai Australia

3. Polestar 2

The Polestar 2 carries that same left-of-centre intellectual appeal that Saab once enjoyed, with a Scandinavian design that pairs exceedingly well with turtlenecks and loafers.

• Manufacturer: Polestar
• Key Specs: Up to 655km WLTP range (long-range variant), RWD or AWD
• Warranty: five years/unlimited kilometres (vehicle), eight years/160,000km (battery)
• Why Consider It? Scandinavian design, premium materials, and concierge servicing.
• More Info: Polestar Australia

4. BYD Atto 3

The BYD Atto 3 is an affordable EV that proves China is taking this whole electric car thing very seriously. The range kicks off at just $39,990, before on-roads, and is backed by a reassuring six-year/150,000km vehicle warranty.

• Manufacturer: BYD
• Key Specs: Up to 420km claimed WLTP range, FWD, 'Blade' battery technology
• Warranty: Six years/150,000km (vehicle), eight years/160,000km (battery)
• Why Consider It? Competitive pricing, decent range, and a cool interior.
• More Info: BYD Australia

Where can you find more information about the EV Fringe Benefits Tax exemption?

The best place to learn more about the exemption and any upcoming changes is the ATO website. There you’ll find answers to questions surrounding what cars are exempt from FBT, how does FBT work, and how much is FBT on a car.