FBT exemption for EVs a “game-changer” for consumers

The affordability of battery-electric, hybrid and plug-in hybrid vehicles will improve dramatically following the federal government’s 2022-23 Budget, which could see a $70,000 EV cost roughly the same after tax as a $41,000 internal combustion vehicle via a novated lease.

This has all been made possible by the government’s decision to exempt electrified vehicles priced under the $84,916 luxury car tax threshold from fringe benefits tax (FBT) and its proposed axing of the five per cent import tariff for eligible vehicles.

Speaking to carsales this week via Zoom, director of novated leasing supplier, Vehicle Solutions Australia, Vanya Andropov described the proposed new legislation as a “game-changer” for consumers.

“What the government’s saying is if the vehicle’s under the 84,916 luxury limit, you can pay for that on a novated lease completely and utterly tax-free,” he said.

“So rather than the FBT component – which is normally 20 per cent of the value of the vehicle – coming off post-tax [salary]... everything goes into pre-tax now. So, the employee is not paying any marginal tax rate on that and the employer can claim all of the GST components of all of those costs.”

The federal government has projected potential savings of $9000 per year for employers and $4700 a year for employees when it comes to a $50,000 EV, with another $2500 wiped off for the purchaser if the vehicle was previously subject to an import tariff.

“What this policy has now done is put novated leasing front and centre for the way to purchase a motor vehicle now,” Andropov said.

“So, if you can get a motor vehicle completely tax-free... You’re not paying any fuel and you’ve got all the other benefits of an EV – it’s one of the biggest things to hit our industry right now.”

The FBT exemption is of course just one element of the government’s wider plan for promoting electric vehicle uptake and ‘decarbonising’ Australia’s automotive fleet.

A key part of this wider strategy will be the installation of 117 ultra-fast EV charging stations nationally ($38.9m) and the establishment of ‘hydrogen highways’ for key freight routes ($89.5m) via the $500 million Driving the Nation Fund.

The Australian Renewable Energy Agency (ARENA) will also receive $146.1m out of said fund over the next five years to invest in emission-reduction projects.

Hoping to lead by example, the government has promised three quarters of its own fleet purchases and leases will be for electric vehicles by 2025 – a reasonable goal given internal combustion vehicles will be banned in the Australian Capital Territory by 2035.

Taking to Twitter to share his support of the relevant 2022-23 budget policies, Electric Vehicle Council CEO Behyad Jafari said the Labor party had “delivered on its commitment to support EVs, while laying the groundwork for the future”.

“Now to delivering the National EV Strategy. A strong Fuel Efficiency Standard will unlock investment from industry allowing govt to fill gaps,” he said.

Referencing a recent survey that found 40 per cent of businesses would buy an EV within the next 15 months if the EV Discount bill is passed, Jafari later tweeted the initiative “makes perfect sense for a business” given managers and owners “often know how their vehicle is used and can see the cost savings from cheaper running”.

For everything you auto know about EVs, listen to carsales' Watts Under the Bonnet: the electric car podcast

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