How Does Tax Apply to Electric Cars?

The FBT exemption for electric cars

If your employer provides you with the use of a car that is classified as a zero or low emissions vehicle there is an FBT exemption that can potentially apply to the employer from 1 July 2022. The FBT exemption should normally apply where:

• The value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for 2022-23) when it was first purchased; and
• The car is both first held and used on or after 1 July 2022.

The exemption also includes associated benefits such as registration, insurance, repairs or maintenance, and fuel, including electricity to charge and run the vehicle. But, it does not include a charging station.

Who the FBT exemption does not apply to

By its nature, the FBT exemption only applies where an employer provides a car to an employee. Partners of a partnership and sole traders are not employees and cannot access the exemption personally.

How do the tax rules apply to home charging units?

The ATO has confirmed that charging stations don't fall within the scope of the FBT exemption for electric cars. This means that FBT could be triggered if an employer provides a charging unit to an employee.

What about the cost of electricity?

The ATO has set down a rate of 4.20 cents per km for running costs for EVs provided to an employee (from 1 April 2022 for FBT and 1 July 2022 for income tax). If you use this rate, you cannot also claim any of the costs associated with costs incurred at commercial charging stations.