Which vehicles are covered?
The exemption covers zero or low emission vehicles, with values below the luxury car tax threshold for fuel efficient cars (currently $84,916), being:
- Battery electric vehicles
- Hydrogen fuel cell electric vehicles
- Plug-in hybrid electric vehicles – if the car has an internal combustion engine, it will only qualify if it can be recharged by an off-vehicle power source
Second hand cars can qualify, but only if their first retail sale was on 1 July 2022 or later.
Salary packaged cars qualify for the exemption in the same manner as other employer provided cars.
The exemption does not cover vehicles other than ‘cars’ as defined for FBT purposes. So, any vehicles designed to carry one tonne or more, or nine passengers or more, will not qualify for this particular exemption.
When the rules take effect
The exemption applies retrospectively from 1 July 2022, to cars first held and used by a person (i.e. any person) on 1 July 2022 or later. This is described as the first retail sale being on or after this date. Cars ordered prior to 1 July 2022 will qualify if they were not delivered until 1 July 2022 or later.
One of the amendments to the original bill is that plug-in hybrid electric vehicles will no longer be exempt from FBT after 1 April 2025 – although pre-existing arrangements with such cars can continue as FBT exempt until the end of the particular arrangement.
Private use of these cars will still result in reportable fringe benefits for employees, including for employees of not-for-profit employers. So employers will still need to perform FBT related calculations for these vehicles.
A further amendment was to legislate the government’s commitment to a review of the arrangements in three years’ time, and to require a report to be delivered within 18 months after the end of the three years. The report will need to consider whether the exemption provisions should continue and what type of motor vehicles should be covered.
Earlier attempts by Independent members to extend the exemption to non plug-in hybrid electric cars and imported second-hand cars did not get through the House of Representatives.
For further information, please contact Elizabeth Lucas.