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Updates to fringe benefits tax (FBT) for vehicles

Updates to fringe benefits tax (FBT) for vehicles

At March 31 of this year, another Fringe Benefits Tax (FBT) year came to its conclusion.

Although there has been much publicity already in regard to the change of FBT treatment for electric and hybrid vehicles, there has also been some amendments to other FBT rules.

This article provides you with a one-stop summary of what is new for FBT in 2023 to save you unnecessarily failing to adhere to the rules.

New fringe benefits tax rules for electric and hybrid vehicles

Typically, when providing a motor vehicle to an employee or associate of a business any private use will be considered under FBT rules to be a benefit given, and therefore attract FBT.

The taxable value of this benefit is calculated either via a flat percentage of the vehicle’s purchase cost or via a logbook calculation of actual private use.

As part of government initiatives to incentivise Australian electric vehicle investment going forward, the provision of electric vehicles will be exempt from FBT provided certain conditions are met. This means no FBT will be payable regardless of the level of actual business use.

Be aware that to access this exemption there are technical requirements which must be met, including:

Definition of an electric vehicle

The Australian Taxation Office (ATO) stipulates that a vehicle is considered an electric vehicle if it falls into one of the following categories:

  • Battery electric vehicle (BEV):
    • Electric motor only; the typical ‘plug in’ electric vehicle.
  • Hydrogen fuel cell electric vehicle (FCEV):
    • Electric motor only, which uses a hydrogen battery to generate electricity.
  • Plug-in hybrid electric vehicle (PHEV):
    • Fitted with a battery that can be charged by plugging in, as well as an internal combustion engine.
    • An important note with plug-in hybrid vehicles is that they will only be considered ‘electric vehicles’ for the purpose of exemptions up to the 2026 FBT year.

The electric vehicle must be new

One of the biggest stipulations is that the vehicle must have been first made available to the employee after July 1, 2022.

Even though it may pass all other requirements, if the vehicle was made available prior to this date, it will not be considered exempt and therefore have exposure to FBT.

No luxury car tax must have been payable on the vehicle

In order to be exempt, the vehicle must have had no luxury car tax paid on the vehicle when first purchased.

For the period July 1, 2022 – June 30, 2023, the threshold for luxury car tax was $84,916.

New rules for commercial car parking fringe benefits

If you are providing daytime parking to employees, there has always been a risk of exposure to FBT if the car parking is within a one-kilometre radius of a commercial car parking station.

Although not applicable for businesses with a turnover of less than $10 million per year, medium to large business with turnover exceeding this threshold need to take care of these rules.

What is a commercial car parking station?

Historically, car parking stations were defined as businesses whose primary purpose is making parking available to the public.

This meant that any place that charged a higher ‘all-day parking fee’ to discourage parking were not considered a commercial car parking station (e.g. shopping centres, hospitals, and airports whose core business is providing other services).

From the 2023 year onwards, the definition has been expanded to now include theses type of parking stations.

This is an issue because if a business provides parking to staff, even if the parking is on their own premises, they are considered to have provided staff a benefit if the parking is within a one-kilometre radius of a commercial car parking station.

Although there are certain carve-outs and reductions available, if not properly navigated this change represents a very real increase to the fringe benefits provided by a company, and therefore the associated tax payable.

This will occur with no real change to the business operations and may represent a sudden unexpected expense.

Speak to the tax and financial experts

Fringe benefits tax is an often-overlooked part of the tax system in Australia however, business owners need to take care that they are not inadvertently triggering issues which can have real taxation consequences.

LDB Group offers a team of experts in the Australian tax environment. Contact us today to discuss how we can assist you with FBT going forward.

Call (03) 9875 2900 or fill in the contact form below.

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