New EVs and PHEVs priced below the luxury car threshold ($89,332) are now FBT exempt when acquired via a novated lease. That, combined with lower running costs, makes them a more affordable option for employees.
Salary packaging these climate-friendly vehicles through a novated lease could save you up to $9,250 annually. Read on to learn how. For more information about the FBT exemption novated lease electric vehicle, click here.
Lower tax burden
As part of a push for more environmentally friendly vehicles, the Australian parliament passed an amendment in 2022 that exempts any electric or plug-in hybrid vehicle under $84,916 FBT. This exemption also applies to cars purchased through a salary packaging arrangement, including those used for novated leases.
The new rules mean that EVs are much cheaper to lease than their petrol or diesel counterparts. That is because the purchase price of an eligible EV and its running costs are GST-free.
The cost saving is even more significant for employees who buy or lease their EVs through a novated lease. It is because salary sacrificing reduces the taxable value of the car, meaning the employee pays less tax. In turn, it means that they can afford to pay for the EV and its running costs with more of their pre-tax salary. It translates into significant savings for both the employer and the employee.
Environmentally friendly
A change to legislation in 2022 means EVs and PHEVs will be exempt from FBT when salary is packaged via a novated lease. It makes them cheaper to run, which in turn encourages adoption. The exemption only applies to vehicles considered cars under tax laws – this means they must be designed to carry less than one tonne and fewer than nine passengers and cost no more than $85,000. For more information about the FBT exemption novated lease electric vehicle, click here.
The financial case for a novated lease is already very compelling, thanks to the lower running costs of an EV. Still, the FBT exemption helps make the decision even more accessible for those considering switching to an electric vehicle. Using the Employee Contribution Method (ECM), you can also reduce the taxable value of your EV by making post-tax contributions to running costs. Then, you can offset the FBT liability by reducing the amount of reportable fringe benefit income you earn. You can see how this all works in our simple novated lease guide.
Affordable
The FBT exemption on electric vehicles means the cost of an EV under a novated lease will be much cheaper than an equivalent petrol vehicle. Novated leases involve an employer paying a car and its running costs from a combination of pre-tax salary deductions and post-tax salary sacrifice contributions.
FBT is an employer-paid tax on benefits provided outside wages – including work vehicles and novated leases. The FBT EV exemption scheme removes the liability for zero or low-emissions cars and meets a certain value threshold – $89,332 in 2023/24. It will lower the purchase price and reduce a range of running costs such as fuel, servicing and tyres. However, it’s worth noting that the value of an EV under a novated will still be reportable and could affect any Centrelink benefits you receive. For more information about the FBT exemption novated lease electric vehicle, click here.
Flexible
A new car is a big commitment, but getting one for free is even more significant. That’s why the tax man has made the FBT exemption available on eligible electric, plug-in hybrid and hydrogen fuel cell vehicles to encourage people to take up novated leases.
If you’re interested in an EV as your next car, contact us to discuss all the options available. Our team of experts are here to help you find the best EV to suit your lifestyle and business requirements. You can also see what models are available to you by visiting our EV Showrooms or booking a test drive online. We’re confident you’ll love driving an EV and we look forward to assisting you with your novated leasing arrangements.
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