Electric Vehicles and Fringe Benefits Tax Exemptions

The rise of Electric Vehicles (EVs) on our roads is not just due to increasing environmental awareness. Eligible EVs may receive a Fringe Benefits Tax (FBT) exemption, making them an attractive option for salary packaging arrangements.

One of the key benefits is that regardless of the amount of private use, the business will not pay any FBT on a complying vehicle. This means all running costs are treated as pre-tax costs.

If you’re considering providing EVs to employees as part of their salary package, here are some key points to keep in mind:

1. The vehicle must be an eligible EV to qualify for the FBT exemption. Further information is available on the ATO website. Please note that Plug-in Hybrid Electric Vehicles (PHEVs) are no longer eligible.
2. The cost of the EV must fall below the Luxury Car Tax (LCT) limit. For 2025–26, the LCT limit is $91,387. More details are available on the ATO website.
3. Second-hand EVs can involve additional complexities. If you are considering purchasing a second-hand vehicle and wish to claim the exemption, please contact us for tailored advice.
4. Although eligible EVs are exempt from FBT, the value still needs to be reported on employees’ PAYG summaries as a reportable fringe benefit.

How to account for this as part of a salary package

a. Novated lease: Your business may lease the vehicle under a novated lease arrangement. The total lease cost, plus any running costs, can be salary-sacrificed from the employee’s pre-tax salary.
b. Business purchase: Alternatively, your business may purchase the vehicle outright. You would then determine the amount to salary-sacrifice from the employee’s pre-tax salary to effectively reimburse the business for the vehicle.

If you would like further information on FBT exemptions for EVs and how to structure these arrangements to best benefit your business and employees, please feel free to contact us.

Published 26/11/25.