If you are asking whether you need to pay FBT on an eligible electric car, the answer is simple. You do not pay FBT on the private use of an eligible electric car or its common running costs if the car meets the rules set out by the ATO. The key is knowing if your car qualifies and whether you are applying the exemption correctly. Many people miss this, and it can cost them money they did not have to spend.
Below, we will walk you through the rules in a way that helps you check your own situation. We will also explain the areas where people get confused. The aim is to help you avoid mistakes and give you confidence about what you can claim and what you cannot.
What is the FBT Exemption for Electric Cars?
The exemption removes FBT from the private use of eligible electric cars. It also removes FBT from common car expenses linked to those cars. This applies to employers who provide cars and to employees who receive them through salary packaging.
But the car must meet all the conditions. If one condition is missed, the exemption falls apart.
Does My Electric Car Qualify?
Below is the question most people ask first.
What are the conditions?
An electric car is exempt only if it meets four rules:
It must be a zero or low-emissions car.
This covers battery electric cars, hydrogen fuel cell cars and plug-in hybrids. Plug-in hybrids stop qualifying from 1 April 2025 unless the exemption continues under specific rules.
It must be first held and first used on or after 1 July 2022.
A lot of people misunderstand this. The date the car is held is not always the date it is used. Both events must occur for the first time from 1 July 2022.
It must be provided to a current employee or their family.
That part is direct and easy to check.
Luxury car tax must never have applied at any stage.
This is where many people slip up, especially with second hand cars. You must know whether LCT applied when the car was first sold. If it did, the exemption is gone.
If your car meets all four points, you can apply the exemption.
What Does “First Held and First Used” Mean?
Many people think this rule is more complex than it is. Here is the simple version.
When is a car “held”?
A car is held when you own it, lease it or have the right to use it.
When is a car “used”?
A car is used when it is available for use by any person. It does not matter if they actually drive it. Availability counts.
If both events occur before 1 July 2022, you cannot claim the exemption. This is true even if you bought the car earlier but only gave it to an employee later. The clock starts the moment the car becomes available to anyone.
What Car Expenses Can Be Exempt?
If the car is eligible, several costs become exempt as well. These include:
- registration
- insurance
- repairs
- maintenance
- fuel, including electricity
This part is valuable for many employers because these costs add up. If they are exempt, the savings over a full year can be significant.
Does a home charging station qualify?
No. A home charging station is not treated as a car expense for FBT purposes. It may fall under a different benefit category, but the electric car exemption does not cover it.
How Do You Work Out Electricity Costs?
This is one of the most common questions. Electricity used at home blends with household use. That makes it hard to separate.
The ATO provides a simple rate to make this easier. The shortcut rate for home charging is 4.20 cents per kilometre for zero emission cars. You can choose to use it if you meet the requirements. If you use this method, you cannot add commercial charging costs unless you can support how much charging took place at each location.
Plug-in hybrids follow a different calculation. They need a method that separates petrol kilometres from electricity kilometres. The ATO provides a practical method for this as well.
Whichever method you choose, keep your records. The ATO expects accurate support for your figures.
Is the Exemption Reportable?
Yes. Even though the benefit is exempt from FBT, it is still a reportable fringe benefit. You must work out the notional taxable value and report it if required. Many people forget this part and cause issues for employees later. Make sure you complete this step each year.
Why Do So Many People Miss Out on This Exemption?
Because many assume the rules do not apply to them. Some think their car is too old. Some assume the rules only apply to brand new cars. Some never check the LCT status. Others get confused about the first use date.
The result is the same. They pay tax they never needed to pay.
The rules are clearer once you break them down. If your car meets the conditions, you are allowed to apply the exemption. Most people only discover this after they have already paid FBT for years. At that point, the chance to reduce the cost is gone.
Do not wait until the next FBT year to check your position. A short review now can protect you from ongoing unnecessary tax.
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