A man leans on the side of an electric vehicle

How to benefit from the Fringe Benefit Tax Exemption for electric vehicles

Patrick Huang ||

Co-authored by Gabriella Bovino


With climate change persisting as an ever-present issue, more people and businesses are exploring how they can tackle climate changes. So, it‘s good to be reminded of tax concessions for employees and employers contributing towards tackling climate change, particularly in the electric vehicle (EV) space.

The Australian Government has incentivised businesses to purchase and provide employees with EVs as part of their remuneration package by removing fringe benefits tax (FBT) payable on EVs.[1] The FBT exemptions apply retrospectively from 1 July 2022[2] for zero or low emission eligible vehicles that are first held and used on or after 1 July 2022. As of 1 April 2025, exemptions will not apply to plug-in hybrid vehicles.[3] This article will explain when and how you can capitalise on these benefits.

So how does it work?
Step 1: Satisfy the requirements of car fringe benefit

A car fringe benefit arises where there is a car, held by the employer (or its associate), with an arrangement with employer (or the entity who holds the car) to allow the employee to use the car for private use.

Step 2: Satisfy the requirements of the section 8A exemptions

The car benefit is exempt from FBT if:

  1. it was provided to a current employee.
  2. the car is provided is a zero or low emissions vehicle;
  3. no amount of luxury car tax[4] was paid on the car before the benefit was provided; and
  4. the entity must provide the car fringe benefit to an employee for privateuse[5] after 1 July 2022.
Zero or low emissions vehicles

To satisfy this requirement, the vehicle must be either:

  1. a battery electric vehicle;[6]
  2. a hydrogen fuel cell vehicle;[7] or
  3. a plug-in hybrid electric. However, these hybrid vehicles will not be considered a ‘zero or low emission vehicle’ from 1 April 2025.[8]
Luxury car tax limit

The FBT exemption can only apply if luxury car tax isn’t payable on any sale of the car. This means that the value of the eligible vehicle in FY2024 can’tt be more than $89,332 (GST inclusive) if it is ‘fuel efficient’,’ (meaning it has a fuel consumption of fewer than seven litres per 100 km[9]) or $76,950 (GST inclusive) for all other vehicles.

Can I use the FBT exemption on any other ‘car expenses’ associated with the EV?

It depends on the expense. Types of exempt expenses include registration and insurance expenses of the EV, repairs and maintenance including battery repairs or “like-for-like” replacements and fuel (such as electricity for charging the battery).[10]

What about charging stations?

According to the Australian Taxation Office, exempt EV-related expenses don’t include home charging stations and are likely to be subject to FBT as a property or expense payment fringe benefit.[11]

Employers could consider providing charging station at business premises. Caution is advised, as an employee parking their car at the station for more than four hours could become a car parking fringe benefit which may be subject to FBT.

For FBT purposes, if an employee has a home charging station for their EV (excluding plug-in hybrid models), a charging rate of 4.20 cents per km can be used as a rate to reimburse employees for the cost of charging their EV at their home (this amount derived from the rate is exempt as a ‘car expense’).[12]

An example

The following example demonstrates the tax savings from salary packaging a novated lease of a zero to low emissions vehicle. To do so, we compare a (lower price) petrol car with a (higher price) electric car.


  • Employee annual salary – $156,000
  • Lease Term – Four years
  • A choice must be made between a petrol car (FBT payable) or electric car (FBT exempt)
  • Running costs (and the balloon payment) of both petrol and electric cars are outlined below:
Type of car Petrol Electric
On-road Costs $52,172 $78,894
Lease Repayments $854 per month $1,316 per month
Running Costs $562 per month $358 per month
Balloon Payment $19,670 $30,384

The comparison table below outlines the tax savings that accrue to the employee over the course of the four-year period.

Petrol Car Electric Car
No Package Salary Package No Package Salary Package
Gross Salary 156,000 156,000 156,000 156,000
Less: metor vehicle costs 0 (16,992). 0 (20,088).
Less: FBT payable 0 (10,202). 0 0
Addback: corporate tax deduction 0 3,061 0 0
Addback: input tax credits 0 5,356 0 6,275
Remaining cash salary 156,000 137,223 156,000 142,187
Income tax and Medicare Levy FY22-23 (45,127). (36,719). (45,127). (39,809).
After-tax lease and running costs (16,992). 0 (20,088). 0
Net After-tax cash 93,881 100,504 90,785 102,378
Tax savings (Year 1) 0 6,623 0 11,593
Tax Savings (Years 2 – 4) 0 1,880 0 5,708
Savings over 4 years 0 12,261 0 28,717
Balloon Payment (19,760). (19,760). (30,834). (30,834).
After-tax payment required 19,760 7,409 30,834 2,117

The comparison table shows that:

  • The tax savings over four years from salary packaging the petrol car (100% subject to FBT) is $12,261 and can be used towards the balloon payment, plus an additional outlay from the employee of $7,409.
  • The tax savings over the same period for an electric car (assuming the FBT exemption applies) is $28,717 and can be used towards the balloon payment, plus an additional outlay from the employee of $2,117.

The example shows that, even though the electric car has a higher on-road cost and a higher balloon payment, the tax savings associated with salary packaging the electric car are greater than the petrol car.

To learn more about the Fringe Benefit Tax exemption for electric vehicles, please contact our Taxation team.


[1] The new exemption is by way of the Treasury Laws Amendment (Electric Car Discount) Act 2022 (the Amending Act), amending the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

[2] Explanatory Memorandum to the Treasury Laws Amendment (Electric Car Discount) Bill 2022 (Explanatory Memorandum).

[3] Schedule 2 of the Amending Act.

[4] within the meaning of the A New Tax System (Luxury Car Tax) Act 1999) (LCTA).

[5] Section 7(1) of FBTAA.

[6] Section 8A(3) of FBTAA.

[7] Section 8A(4) of FBTAA.

[8] Ibid.

[9] As a combined rating under national road vehicle standards in force under section 12-1(4) of the Road Vehicle Standards Act 2018.

[10] See section 136(1) of the FBTAA.

[11] Australian Taxation Office Fact Sheet, “Electric vehicles and fringe benefits tax”, published 24 February 2023, Siebel/TDMS Reference Number: 1-WQGMRKG.

[12] PCG 2023/D1 – Electric vehicle home charging rate – calculating electricity costs when charging a vehicle at an employee’s or individual’s home.


Send an enquiry

Any personal information you provide is collected pursuant to our Privacy Policy.


More posts

Understanding roles in the strata scheme

A strata scheme is a building or group of buildings that have been divided into lots which can be apartments, villas, offices, units or townhouses. This will be articulated in the strata plan.

Can i put my home on Airbnb?

Airbnb is a form of short-term rental accommodation. To add your property to Airbnb in NSW, you are required to meet several laws and regulations governing short-term rentals.

When are liquidators required to seek approval to retain legal counsel?

When does a liquidator (or the company he or she is appointed to) need court, creditor, or committee approval to validly retain a solicitor to act in a liquidation matter which is likely to extend for longer than three months?  The answer to this question has only recently been settled.

Proposed changes to building and construction law in NSW

The Building Bill 2022 (the Bill) is the key avenue through which the NSW Government has proposed to reshape the culture of the building and construction industry by eliminating poor performance and improving the quality of building statewide.

Can you dismiss an employee who fails to return to the office?

Slowly but surely, most employers are requiring employees to return to the office for at least a portion of their working week. Some employers continue to struggle with employees resistant to returning to the office or those who have an expectation that they can continue to work from home whenever it suits them.

New powers to combat phoenixing in construction

The rise of phoenixing in the building and construction industry in Australia in recent years has proved a significant challenge to regulators. Mismanagement of time or cashflow can quickly propel businesses into insolvency.

The NSW Building Commission’s extraordinary powers

In late 2023, the NSW Government passed the Building Legislation Amendment Bill 2023 (Amendment Bill). The Amendment Bill established the NSW Building Commission and granted it extraordinary powers to enter construction sites, inspect work and take away information and materials.

© 2024 Coleman Greig Lawyers   |  Liability limited by a scheme approved under Professional Standards Legislation. ABN 73 125 176 230