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EVs & PHEVs exempt from FBT in Australia

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List of EVs and PHEVs eligible for $0 FBT through a novated lease

The list above is based on vehicles with an estimated cost below the luxury car tax threshold, as at December 2023. On-road costs, such as dealer delivery, standard and statutory warranties, accessories, modifications and treatments to the car before it's delivered may impact the cost for the purpose of working out luxury car tax, according to the ATO.

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What are the eligibility criteria for the novated lease FBT exemption?

To be eligible for the fringe benefits tax (FBT) exemption on an electric car novated lease, the vehicle you are leasing must be:

  • A battery electric vehicle, plug-in hybrid electric vehicle, or hydrogen fuel cell electric vehicle.
  • A passenger vehicle designed to carry a load of less than one tonne and fewer than nine passengers.
  • First held and used after 1 July 2022 (i.e. it was available for use for the first time after this date).
  • Valued below the luxury car tax (LCT) threshold which is $89,332 for the financial year 2023/24.

If you’re considering a novated lease on a used car, to be eligible for the FBT exemption you may want to consider these specific aspects of the above criteria:

  • The used vehicle must have been first held and used (i.e. by the original owner) after 1 July 2022. If it was in use at all before that date, it will not be eligible for the FBT exemption, even when purchased subsequently.
  • The vehicle must never have been subject to LCT. So even if its current sale value is below the LCT threshold, if it was previously subject to LCT (i.e. on a previous sale or when it was imported), it will not be eligible for the FBT exemption.
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How will I know if my electric vehicle is below the LCT threshold and is therefore FBT exempt?

Your Novated Lease Australia consultant can help you understand which new electric vehicles and PHEVs in Australia are valued below the LCT threshold and are therefore exempt from FBT. The dealer selling the car should also be able to advise you on this.

However, as a general guide, the ATO explains that to be below the LCT threshold, the vehicle’s retail price must be below $89,332 (for the 2023/24 financial year). That is the price of the car, including:

  • GST and any customs duty (GST is not payable on the vehicle with a novated lease, but it is factored into the LCT value of the car).
  • Dealer delivery charges.
  • Standard and statutory warranties.
  • Any accessories, modifications, and treatments applied to the car before delivery. 

The LCT value of the vehicle does not include:

  • Australian taxes, fees, or charges such as stamp duty, transfer fees, and registration.
  • Compulsory third-party insurance.
  • Extended warranties.
  • Costs associated with financing the purchase of the car.
  • Service plans.
  • Modifications made to the car solely to adapt it for driving by, or transporting, a person with a disability.

What types of vehicles do not qualify for the EV FBT exemption?

The following vehicle types will not be eligible for an FBT exemption, even if they are electric. These kinds of vehicles are not eligible to be paid for through a novated lease more broadly, even if you factor out the FBT exemption.

  • Motorcycles or scooters
  • Large work vans (i.e. not a passenger vehicle)
  • Vehicles that can carry a loan of more than one tonne.
  • Caravans and other motor homes.

In addition, mild hybrids (i.e. cars with an electric motor but that do not require charging such as a Toyota RAV4 or Mazda CX-90) are not counted as low-emission vehicles for the FBT exemption. You can, however, still salary sacrifice this kind of vehicle – if just won’t be exempt from FBT.

Commonly asked questions about the FBT exemption on EVs

FAQ questions

The FBT exemption threshold for the 2023/24 financial year is $89,332. This is the luxury car tax threshold for fuel-efficient vehicles set by the ATO. Cars valued below the threshold at the time of purchase will be exempt from FBT for the duration of the novated lease, even if the ATO's threshold changes in subsequent years.

Zero- and low-emission vehicles that were first held and used on or after 1 July 2022 are exempt from FBT. That includes battery electric vehicles and plug-in hybrid electric vehicles. To be eligible, the vehicle must be valued below the luxury car threshold of $89,332 for the 2023/24 financial year.

Plug-in hybrids will only be exempt if the lease agreement commences before 1 April 2025.

If FBT is payable on an electric vehicle, it is charged at 47% (the highest income tax bracket rate of 45%, plus Medicare levy of 2%) of the taxable value of the benefit, according to the ATO. However, if the vehicle is eligible for the FBT exemption, there is no FBT payable.

If the retail price of the vehicle is below $89,332 (in FY 2023/24), the vehicle may be eligible for an FBT exemption. However, there are specific rules for what should and shouldn’t be included in the price of the vehicle when calculating whether the vehicle is FBT exempt or not. 

To remove the guesswork, your Novated Lease Australia consultant will guide you through the selection of new EVs and PHEVs valued below the LCT threshold, ensuring they qualify for an FBT exemption.

Vehicles that do not qualify for the FBT exemption include:

  • Motorcycles or scooters.
  • Large work vans or vehicles capable of carrying more than one tonne.
  • Caravans or motorhomes.
  • Mild hybrids, like the Toyota RAV4 or Mazda CX-90, do not qualify as low-emission vehicles for the FBT exemption. 

The FBT exemption delivers substantial extra income tax savings by further lowering an employee's taxable income. This is because all lease costs to be salary sacrificed with pre-tax salary.

This makes novated leases an even more attractive option for acquiring an environmentally friendly vehicle.

Yes, packaged car expenses and charging costs under a novated lease are also exempt from FBT if the vehicle being leased is eligible. This can significantly reduce running costs and boost the tax savings, making EVs and PHEVs even more economical to drive.

The exemption is available until 31 March 2025 for plug-in hybrid vehicles. For battery electric vehicles and hydrogen fuel cell electric vehicles the FBT exemption is currently open-ended. 

However, when announcing the policy the government said it will review the exemption by mid-2027 based on its impact on EV adoption in Australia. At that stage it's likely the government will make a further announcement regarding the longer-term timeline for the FBT exemption.
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